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Hot Stocks: Steve Jobs Health Concerns No Reason to Bail on Apple Inc. (Nasdaq: AAPL)

By , Money Morning •

Apple Inc. (Nasdaq: AAPL) stock is set to plunge today (Tuesday) due to growing concerns about Chief Executive Officer Steve Jobs' health. But rather than retreat from the tech heavyweight, investors might be better served to load up as the stock pulls back.

No doubt, Steve Jobs represents the soul of Apple. He guides the company's general direction - driving its innovation and expanding its global profile. But even without Jobs, Apple is a strong fundamental company with a stockpile of cash, a rock solid product line and mainstream brand.

Jobs, a 55-year old cancer survivor, said yesterday (Monday) that he would take a medical leave of absence to focus on his health.

"I love Apple so much and hope to be back as soon as I can," he said in an e-mail to employees. "In the meantime, my family and I would deeply appreciate respect for our privacy."

Jobs said he would continue to be involved with major strategic decisions, but Chief Operating Officer Timothy Cook will be responsible for day-to-day operations. Cook, 50, oversaw Apple in 2004 when Jobs was diagnosed and successfully treated for pancreatic cancer. He also manned the helm when Jobs took a six-month leave of absence to undergo a liver transplant in 2009.

Rumors about Jobs' health and news of the transplant drove Apple shares from $98.27 on Dec. 12, 2008 to $82.33 on Jan. 26, 2009. However, the stock rallied with the overall market not soon thereafter, soaring to $144.67 on June 5, 2009 and closing at record high $348.48 Friday.

Any investor that had bought Apple stock at its January 2009 low would have scored a return of 348.5% in just two years time.

The market was closed yesterday in observance of Martin Luther King Jr. Day, but futures on the Nasdaq-100 Index, of which Apple comprises 21%, sank 1.3% in an electronic holiday trading session that ended at 11:30 a.m. New York time. Apple shares traded in Frankfurt, Germany fell as much as 7.5% in trading

It's not clear how investors will react when the market opens for business today. Most analysts expect Apple stock will fall but are unsure of how steep the decline will be. Indeed, investors may be less likely to panic having been given a day to digest the information.

Furthermore, Apple is set to announce its financial results later today, and Wall Street analysts estimate that the company raked in more than $24 billion in sales during the last quarter. In fact, in the September 2011 fiscal year, Apple could generate more than $100 billion in revenue, given the popularity of its iPad and new Mac Air.

UBS AG (NYSE: UBS) analyst Maynard Um wrote in a note to investors on Jan. 12 that the iPad, iPhone and iPod were "some of the most heavily gifted items during the holiday season."

Um said international sales of the iPhone, available in 89 countries at the end of the fourth quarter, helped push iPhone unit sales to 15.6 million in the quarter, 1.5 million more than in the June through August quarter.

And what's more is that Apple will soon be releasing for the first time ever an iPhone to be used on Verizon Communications Inc.'s (NYSE: VZ) network. Some analysts estimate that Apple could double its U.S. earnings when Verizon becomes a carrier.

The company also is expected to release a second-generation iPad and a fifth-generation iPhone later this year.

"The fears are overblown," Laura DiDio, principal analyst at ITIC, told CNNMoney. "Apple can live off of the success of the iPad and the iPhone for many years to come."

These innovations and others have left Apple with a cash horde of $50 billion that could swell to $70 billion by the end of the year. And while Jobs' departure is a loss, the company can still count on a strong cast of supporting players that includes industrial designer Jonathan Ive, marketing guru Philip Schiller, and iPhone software specialist Scott Forstall among others.

Analysts surveyed by FactSet expect Apple to report first-quarter net income of $5.41 per share on $24.34 billion in revenue.

In the holiday quarter of 2009, Apple reported net income of $3.67 on $15.7 billion in revenue.

[Editor's Note: Money Morning Chief Investment Strategist Keith Fitz-Gerald recently appeared on the Fox Business Channel's Varney & Co. to discuss the recent developments at Apple. You can watch the video by clicking here.]

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