Apple Update: Buy, Sell, Hold?

Unless your have been out of touch over the last 23 hours you know that Apple ($AAPL) reported earnings last night that were short of analyst expectations. The result is the stock getting clobbered today and most recently trading at $452/share, down 12% on the session. The stock is now at the lowest level in nearly one year and is 35% from its all-time high of $705 that was set in September of last year.

Now to the more important aspect of this blog post: What to do now?

Buy? Well there is certainly a case to buy the stock at current levels because based on valuations alone the stock has huge upside in the coming years. The counterargument to this thesis is that growth is slowing and Apple has lost its edge and therefore should not be valued at the same level as competitors.

Sell? Selling now and locking in what is most likely a gain is one strategy that makes sense because you are not losing money and you can always buy the stock back at a later date in the future. This has been the common theme today - selling into the news. In the years I have watched stocks fall as Apple has there often tends to be a day/week when everyone throws in the towel. This could very well be that week for Apple and it could be marking a bottom.

Hold? Assuming you own the stock this would be my strategy of choice today. By holding you are not joining the masses and panic selling - when has that ever worked out for you? You are also giving the stock a week or so to shake out the weak hands and see what is left. You are also giving the stock a chance to see if it attracts value buyers and the beaten down levels.

Now that I have laid out the three options you should have a better idea of what to do with your Apple shares. For our clients we are holding at this point. We still have a solid gain on the stock and believe the selling is overdone and a bottom will be created in the near future. Therefore selling now is not the best strategy. As we do with all stocks we will re-evaluate Apple on a daily basis for clients.