Bloomberg News reports that Apple Inc. (NASDAQ: AAPL) reported a 57% profit rise that afternoon. But Apple’s EPS of $1.76 fell short of the highest estimate — $1.77 (and ‘whisper numbers’ were as high as $2). The aftermath? Apple’s stock is down 12% in after-hours trading. At $138.10, the stock is down 32% from its all-time high of $202.96 set final month.

Last month I discussed Apple’s valuation with Erin Burnett on CNBC and concluded that it was a bit steep. The problem with companies like Apple — that investors recognize as exceptional product developers — is that their Price/Earnings ratios rise so high that it is very difficult for them to keep exceeding ever higher expectations.

In Apple’s case, the problem nowadays

was that Apple’s earnings floped to top the most optimistic of analysts’ estimates and sales of iPod media players trailed projections. Steve Jobs’s forecast plus heightened concern that a slowing U.S. economy will cause consumers to cut back on purchases of Macintosh personal computers and iPhones.

Does the 32% drop in Apple’s price produce you want to buy more or get out?

Peter Cohan is President of Peter S. Cohan & Associates. He additionally teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Apple securities.

Original post by Peter Cohan

mortgage insurance income taxes stock market debt child support law foreclosure loans finance