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Tuesday, October 19, 2010

When good isn't good enough

Apple (AAPL) probably now has produced one of the classic examples of "buy the rumor, sell the news" I've ever seen. Its earnings report blew away all estimates by wide margins on earnings per share and revenues. Its forecast was a little weak, but then again Apple always guides low. Causing this sell-off is the fact that iPad sales were weaker than estimated and the suspicion that the forecast might indicate a slowing in growth. I would not go so far as to say that this decline represents a buying opportunity because, even with its growth rate, Apple shares still trade at a premium to the overall market that is large enough that it warrants caution. At this valuation, there is very little room for error and this sell-off reflects that.

Now, you might wonder why I took a screenshot. The reason is that the change in the stock price after a mixed bag of an earnings report like that one is subject to a great deal of volatility. It could be that eight hours from now any comments about Apple's sell-off might be moot.

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