The estimates weren't even that bad-- look at the year ago estimates. The company is thriving, making tons of money, and growing at greater-than-industry rates. It's pretty crazy how irrational investor behavior can have such a huge effect.
A friend of mine at Apple reminded me yesterday that they made 300m on just the interest of their war chest. A few years ago, they were having trouble making that much just on their products.
Their P/E ratio, after the drop, is near 30. You have to grow far above industry rates to justify that.
The drop may be caused partially by irrational behavior, but in poker we say that even the blind squirrel finds an acorn eventually. In this case, irrational behavior partially corrected opposing irrational behavior.
"A friend of mine at Apple reminded me yesterday that they made 300m on just the interest of their war chest. A few years ago, they were having trouble making that much just on their products."
That's evidence that they'll stick around, but it's a bad sign when a company makes most of their money from depositing cash in the bank. It's irrational to value $1 of Apple-cash at much more than $1 if the main selling point is that they won't spend it: you can do just as well putting your own money in the bank, and save the brokerage commission.
A friend of mine at Apple reminded me yesterday that they made 300m on just the interest of their war chest. A few years ago, they were having trouble making that much just on their products.