Writing for TheStreet.com, Thomas Lepri advises readers that buying Apple stock is a risk, even though the company is profitable. His comments come in a new column entitled
Apple No Bargain as Crunch Time Nears.
One key to Apple’s ability to sustain profitability is its ability to reverse “a deeply entrenched trend in the education market toward computers running the Windows operating system,” according to Lepri.
Lepri’s analysis of Apple’s financial state is much of his cause for concern. When you subtract Apple’s formidable US$4.1 billion cash reserves, Apple is trading at anywhere from 29 to 52 times its estimate 2002 earnings, depending on whose figures you’re using.
“In other words, separating the cash from the enterprise does nothing to make Apple look any cheaper,” said Lepri.
Another strike against Apple is the old marketshare argument. Lepri quotes one analyst as saying that Apple’s track record is worse than the worst auto manufacturer when it comes to cyclicality.
“Analysts now estimate that Apple’s sales will reach $6.7 billion by 2002. That’s pretty much where they were in 1991,” said Lepri.
Apple’s slipping marketshare in the educational market represents a global trend towards the Windows standard, said Lepri. But the writer recognizes that an Apple that’s strong is schools could bode well for long term Mac sales prospects.
“Apple’s dominant presence among educational institutions helped create a generation of faithful users and set the stage for its initial strong forays into the consumer market,” said Lepri.
Lepri seems to be skeptical of Apple’s claims of financial health and sustained profitability, however.
“That’s not to say valuing Apple is impossible. But it’s certainly hard enough to make claims to its relative safety seem greatly exaggerated,” said Lepri.
More details are available on