Would you buy, or stay out?

Apple designs consumer hardware and the software that runs on it. Its most recently reported fiscal year, ended September 29, 2007, was carried by the iPod and the Mac: 51.6 million iPods and 7.1 million Macs sold. The iPhone has been on sale for about six months. Today Apple is on stage at Macworld introducing the MacBook Air.

• •This is still an iPod company. Music products brought in $10.8 billion last fiscal year and Macs $10.3 billion, while the six-month-old iPhone booked $123 million — well under 1% of sales. Whether it becomes a third pillar or an expensive side project is an open question.
• •The fundamentals underneath are strong. Revenue grew 24% to $24.0 billion, net income grew 76% to $3.5 billion, and the company holds $15.4 billion in cash and investments against zero long-term debt. Apple pays no dividend, so every dollar of return has to come from the share price.
• •You are paying up for that growth into a weakening economy. At $169.04 the stock trades near 43 times last year's earnings, and it is already 15% below its late-December high as credit markets tighten and forecasters argue over whether a recession has begun. Apple sells things consumers can put off buying.