Steve Jobs greatest invention is Apple. He learned from the mistakes of his youth, and came back with a plan of innovation. A deep bench, with operational excellence and an assembly line of innovation.
Every tech blogger has already given their two cents about the implications, from a company perspective. But my focus is on the perspective of the stock.
Uncertainty causes a discount. That is a fact.
When we look at AAPL's 2012 forward PE, it is around 15. Google, arguably AAPL's closest comparison (with respect to being a large fast growing company) is trading at a next year forward PE of 18-19.
If European trading is any gauge, AAPL will take a big hit tomorrow. If it takes an 8% hit its 2012 forward PE will be around 13. Think about what this means. It means the market thinks the forward estimates are too high. AAPL usually trades around a 20 PE. Assuming the market is efficient, the market is saying next year AAPL will have an earnings of 16.5 (stock price of 330 in relation to a PE of 20: 330/20). Zero growth compared to the last four quarters of earnings.
For a company that is entering one of the strongest product cycles in history, that will last for at least 2-3 years, Apple is already trading at a long-term discount.
But looking at AAPL from a trailing PE basis, AAPL should report north of $6 per share tomorrow (if you listen to some of the top bloggers) or mid/high 5s (if you listen to wall street estimates). With the strength of its product cycle, AAPL should not be trading below a trailing PE of 18 (it should be trading higher).
With an EPS of 6.30, its tailing PE is 17.78, which means stock price below 320 is a steal.
With an EPS of 6.00, its tailing PE is 17.48, which means stock price below 314 is a steal.
With an EPS of 5.70, its tailing PE is 17.18, which means stock price below 309 is a steal.
Nothing lasts forever, no matter how much we would like it too, but the next 2-3 years are fairly certain. (Three years is enough time to prove Jobs' greatest legacy is the factory of innovation known as Apple, Inc.)