Microsoft (MSFT) has lost more than 13% of its total worth since July 26 and is trading with a P/E under 9. The P/E is more understandable since the company is worth more than $200 billion but the price action surprises me. I cannot think of anything this company has done, in less than a month, to justify a loss of nearly $34 billion. The company did announce earnings on July 21 but beat analysts by $0.02 and posted sales gains of 35% year over year. What's impressive about these numbers is that Microsoft does not have a competitive product to Apple (AAPL), HTC Corp., or even Research in Motion (RIMM) with handsets, and the company still posted incredible gains. The company has teamed with Nokia (NOK) as both try to develop a handset that will be competitive against the big boys. With Microsoft and Nokia's innovation, I have no doubt that a successful product will be on sale early next year from the two companies.
LDK Solar (LDK) is trading with a price to earnings of 1.69 after nearly dropping 23% on Friday. I am not sure I have ever seen a P/E quite that low, especially for a company that posts gains well over previous year's earnings on a regular basis. The company's new guidance is for $710-$760 million, analysts expected $772 million. This price action makes no sense to me because the company posted revenue of only $565 million last year during the same quarter and was trading over $7. The company is on track to post record earnings along with more than $200 million in revenue year over year and the price went down. This should give investors a good opportunity as the stock should see strong gains when the market reverses.
SanDisk Corporation (SNDK) has lost more than 20% of its value since announcing earnings on July 21. The company posted record Q2 sales with $1.37 billion compared to $1.18 billion year over year. The company raised its low end projections for the full year putting the company on pace to post record revenue. The stock is now significantly oversold with a P/E of only 6.14, therefore I do not believe the selling pressure can sustain at its current rate. The company has a high institutional ownership along with long term investors who see the long term benefits of this company. The company reported less in earnings during the previous quarter because of increased spending on research and development, as the company looks for long term growth. I expect the stock to rise quickly upon a market reversal as the company's products are being used by more consumers everyday with the popularity of computer use growing on a global level.
Intel Corporation (INTC) has lost $20.5 billion during the last month, or 16% of its value. The company recently announced earnings that posted a 22% increase in revenue year over year along with an EPS of $0.55, beating estimates by $0.06. Some investors had worried that revenue may decline as a result of a sliding PC business. The company not only increased revenue but raised guidance for the 3rd quarter. The company has been able to create higher revenue because of accelerated growth in emerging markets along with data centers.
The company announced these developments during the last month while increasing its dividend to $0.21 from $0.18. Investors can easily conclude the drop in price had nothing to do with the company's fundamental performance. The stock is trending lower as a result of panic within the market, but I believe the downtrend is near an end and the reversal will bring new highs to the company as financials continue to improve. The yield is 4.38 for security and the P/E is 8.79, which indicates it is oversold, and with all the benefits that Intel provides, this could easily be the best stock to own over the next 5 years.
Apple, Inc has outperformed the market during the last month losing 8% of its value. The stock is the largest among other technology stocks with a market cap of $330 billion. Even with a cap this large, I consider Apple to be considerably undervalued. It is a well known fact to most investors that Apple's income statements and balance sheets are among the strongest within the market. The company continues to increase revenue, profit margins, and assets while compiling no debt year over year.
The company's recent quarter on July 19 was its best yet, as it significantly improved nearly all categories by a large margin. The company announced guidance below expectations after earnings were announced, but it did not keep the stock from reaching all time highs over $400. At $350 the stock is a strong buy. Apple has significantly outperformed earnings in each of the last 5 quarters, and with lowered guidance I expect the company to humiliate expectations.
Apple is one of very few that could easily create additional revenue. Almost every store that sells iPads or even iPhones have waiting lists to purchase the products, such as AT&T (T), and Best Buy (BBY). With such high demand in the company's product, I do not expect earnings to disappoint or post below expectations. The company should be unveiling the new products in the near future. The iPhone 5 and iPad 3 should be released in the coming year, or before, as consumers await with excitement. Apple has done a great job with timing, since the iOS revolution, by releasing new products while old ones are still best sellers within the industry.
I expect retailers to continue selling the older iPhone and iPad models but for prices to drop, making it more affordable for consumers who cannot afford the latest products. The company has mastered this skill, and I believe with 3 iPhones and 3 iPads the company will see earnings beyond any expectations. I believe that Apple will become the first $1 trillion company within 3 years. Many believe this number is a bit of a stretch, but the company is perfection within organization.
Apple does everything better than its competitors and as long as Steve Jobs stays at the top, the company will remain the best. This is both a short and long term position because once the market recovers I doubt the company will ever test $350 again, unless it splits. The market may drag this stock down another $10, but investors never know when the company is going to announce major developments which include release dates of the new Apple products. I believe this announcement will send the stock soaring and with 3 generations of greatness, along with other areas of innovation, I will not be expecting Apple near $350 ever again.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MSFT, LDK, SNDK over the next 72 hours.
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