The market works in mysterious ways because I have no other way to explain investors’ reactions to Apple Computer’s (AAPL) quarterly report Tuesday afternoon. During after-hour trading Tuesday, Apple’s stock price dropped 10 percent before rallying late to recover. The drop in stock price was not because Apple failed to meet analyst EPS of $0.37 a share, when not surprisingly they earned one penny better at $0.38 per share.

On top of that, Apple’s revenue increased by 57 percent from a year earlier while the quarterly profit quadrupled, according to calculations from the Wall Street Journal. Sales of Apple’s Mac computers have increased nearly 50 percent from last year as well. All right, all right, I’ll tell you where the problem is, and it’s not because the iPod missed analyst expectations. It is the god-like reputation that Apple has built up that any information that is not good news automatically makes it bad news for the shareholders.

Obviously, the iPod not selling as much as desired is not a good thing. I, like everyone else, would like to see consistent sales growth on every product. But let’s not lose our heads over this number. You’ve got to take into account that Apple just came out with the iPod Nano and plans to release a video iPod soon. In this case, demand for one product will reduce the demand for the other. Another possibility for the decrease in sales could be in the $300 to $400 price tag for a music player, but then again, growth does have to slow down at some point.

I don’t believe the decreasing sales of the iPod have as much to do with Apple’s future profitability as other investors out there; it is not the sole product they produce. The pay-per-download iTunes have become increasingly popular, especially with their added portability now on cell phones. You can’t forget the niche of the Apple iBook either, where Apple’s market share can only go higher.

So, we should ask ourselves if it is too late to invest in Apple. The possibility that Apple was overpriced to begin with isn’t that remote, with a following just as prevalent as Google users. But personally, I believe all of the above information was already priced into Apple.

If you take everything into account, the increase in EPS, the increase in revenues and the increase in sales for its Macintosh computers, the decrease in sales of the iPod pales in comparison. The reaction taken by the investors allows us to purchase this stock at a discounted price. That being said, I am willing to wait to purchase this stock until the reaction dies down, as the stock decreased over four percent yesterday alone.

Stock Pick of the Week

Advanced Micro Devices (AMD) is known for being Intel’s competitor in microprocessors. On Tuesday, they released their quarterly earnings and stated a 73 percent increase in their profits with chip sales increasing by 44 percent. Also, AMD stated that their fourth quarter sales should increase between seven and 13 percent more than their third quarter numbers, which could jump as much as 50 percent from last year’s fourth quarter’s numbers. Even with the impressive earnings numbers and strong forecast, the stock still dropped $3, over 12.5 percent down to $21 yesterday at close because of an ‘underweight’ rating given to them by Prudential. Take what you will from analyst ratings, but I see this as a chance to buy AMD, a company with strong current and future growth prospects, at a discount. Price: $21.00.

Jeffrey Lipsey is a senior in Business. His column appears on Thursdays. He can be reached at [email protected].