Apple at $500: A Cheery Consensus
Feb 19th 2012 4:38PM
Updated Feb 19th 2012 4:40PM
Warren Buffett once wrote that "you pay a very high price in the stock market for a cheery consensus."
Apple (NAS: AAPL) investors, beware: There's a cheery consensus about the company behind the iPad, iPhone, and Mac computers. Consider:
Analyst Opinion, February 2012
Number of Analysts, February 2012
Analyst Opinion, February 2011
Number of Analysts, February 2011
|Strong Buy||24||Strong Buy||28|
Data from Yahoo! Finance.
Of the 55 analysts Yahoo! Finance lists, just two are bearish on Apple at today's $500-plus price. Only one analyst was bearish this time last year, and the stock has gained some 40% since then. (Bloomberg tracks 56 Apple analysts ... and recently profiled the only one with a "sell" rating.)
Short interest, another bear indicator, is also modest. Short interest in Apple stands at just 1.14%, lower even than IBM and Johnson & Johnson.
As the stock has risen over the past decade, shorts have been burned -- or converted Apple believers. The following chart shows Apple's share price (blue line) versus the number of shares sold short (gold line).
Source: S&P Capital IQ.
I don't blame investors for removing their money from the path of the Apple freight train. And to be clear, I'm not calling for a hiccup for Apple -- I recommend watching Fool.com technology analyst Eric Bleeker's positive outlook for the stock. With all that cash, Apple seems well positioned to weather any economic climate, and the stock's trailing and forward price-to-earnings ratios are reasonable.
So Apple investors, here's the bad news: In the stock market, near-total agreement is rarely a good thing. But take solace in the good: Even though there's a cheery consensus, it hasn't driven up the stock's price multiples.
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At the time this article was published Fool.com managing editor Brian Richards doesn't own shares of any companies mentioned. The Motley Fool owns shares of Apple, Johnson & Johnson, and IBM. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Apple, creating a bull call spread position in Apple, and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy.
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