Intestinal Fortitude

AAPL has traded between $621 and $575 in the past five days.

In recent days investors in Apple have needed a strong stomach. The stock fell $20.90 and closed below $600 today; projections about the company and the stock are all over the map. (Absent intestinal fortitude, I just pop antacids, which are also a good source of calcium.)

We've seen this volatility before. iPhone sales were down for the September quarter because of the late 4S introduction and the unenthusiastic reception accorded to its voice-command software Siri. Coupled with the death of Apple's founder, the share price drifted lower through December. After blowout earnings were reported in January, the stock has rocketed upward until it hit headwinds ten days ago.

While the stock isn't cheap versus where it's been, standard valuation measures are not flashing red. Consensus earnings estimates for the fiscal year ending September, 2012 are $44 per share. (Apple has already earned $13.87 in the December quarter and only needs to earn $10.03 for each of the next three quarters to hit that mark.) At today's close Apple's price-earnings ratio, the so-called forward earnings multiple, is 13.4 ($587.44 / $44), which is about the same PE ratio as the S&P 500.

In addition the recently announced dividend of $10.60 per year lures "value" investors who will find the 1.8% yield ($10.60 / $587.44) appealing.  And we haven't even talked about the wildcard upsides of a new iPhone 5 or the rumored Apple TV.

Anything can happen, but I don't see Apple falling below $550, while $650 to $700 is an entirely reasonable expectation by January, 2013. [Disclosure: I am long Apple.]

Including the recent sell-off, AAPL is up 71% over the past 12 months.