Apple Inc. (NDAQ: AAPL) announced after-hours yesterday that the company has no plans for a share buyback or dividend despite strong rumors that the iPod-maker would return some of its more than $18 billion in cash and short-term investments to shareholders. Instead, the company announced that it was taking a very conservative stance when investing its cash. This has caused some speculation that Apple may be facing a cash crunch or gearing up for a larger investment in the near future. So, is Apple stock a buy at these levels anyway or is their refusal to unlock value a sign of bad news to come?

Apple announced that it expects its current estimates and guidance to be on track, despite speculation that its iPhone sales may be in trouble. The company also announced that it is working with Nike to make the iPod compatible with gym equipment. The two companies are partnering with gym equipment manufacturers and health clubs to allow members to plug their iPod Nanos into cardio equipment to track workouts, set goals and upload information to a Nike website. Many are hoping that this new partnership will help spur sales of its slowing iPod to make up for an expected decline in iPhone sales.

Meanwhile, Apple stock continues to trade at a reasonable multiple of 27x and a cheap 19x forward earnings. These numbers put the stock's PEG ratio at around 1.09, which indicates that it is fairly priced given its current growth, while the forward earnings are a clear indication that there is some concern about FY2008 results. Some analysts find it hard to believe that the company will be able to retain its current growth given the weakness in the U.S. economy combined with the many potential problems facing the iPhone - a key factor in Apple's future.

All in all, it is hard to argue with a 29% ROE and strong growth now, but there are many concerns about the company's future. Many analysts believe there could be trouble for their iPhone ahead; however, it looks like the majority of this risk is already priced into the stock. In the end, this is a stock that is definitely worth watching through 2008 given its cheap valuation now and strong potential growth prospects if it surpasses expectations!

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