Apple Fell Flat On Its Face Last Week, But...
Disclosure: I have no positions in any stocks mentioned, and
no plans to initiate any positions within the next 72 hours.
But before we get ahead of ourselves, let's back up for a moment.
Why was last week different from all others in the world of Apple? The company that could do no wrong took a barrel roll. It had its big lights put out. Its feet turned to clay. It... you get the point.
It stunk up the joint.
Shares of Apple fell more than 2% in trading on Friday, a red punctuation mark to a week in which it lost nearly 5% of its value. Friday even featured the previously unthinkable: a handwringing apology from Tim Cook for a job poorly done on the mapping program on the new iPhone5. And that wasn't even all the bad news stuffed into Apple's ignoble little week. Research In Motion (RIM), reliably fading into oblivion, reported earnings that beat expectations and Barnes and Noble (BKS) unveiled more products designed to kick Apple in the shins. Meanwhile, Amazon (AMZN) and Google (GOOG) and everyone else with a tablet or smartphone and a dream kept at it too.
Apple, though, is poised to recover. The reasons go beyond mapping fiascos and competition attempting to breach their castle wall. We're talking the economy, stupid.
Traders spent most of the fourth fiscal quarter, which ended Friday, lost in the thought that the economy was recovering, which propped stock prices up against better judgment.
Last week, though, came a nearly inarguable shift. Pull back all those end-of-month-and-quarter economic reports and you'll reveal an economy that is nowhere near recovery.
Everything that should be up, was down - and everything that should be down, was up. Durable good numbers were the worst in three years, Gross Domestic Product was revised to show the economy a mere rock skip from recession, and consumer spending and real income were bad and worse.
In any normal week, market mood won't easily recover from such a deluge of reports. But this is no normal week. At best, traders will wait this week out for Friday's jobs report. In the void, while biding their time, traders will search for safety. There will be a gravitational pull toward healthcare stocks like Merck (MRK), Pfizer (PFE) and Johnson and Johnson (JNJ), which offer comparatively recession-free business and dividends. And there will be a move back into Apple, even if just for the time being.
Nevermind Tim Cook's long-term worth or whether RIM or Barnes and Noble will rise from the dead to slay Apple in 143 years. This week will be about the here and now search for fairly reliable earnings. And though Apple reported disappointing third-quarter results and while you can marshal an argument that it will disappoint long-term, you will not be able, in this week of economic trial and tribulation, to get trader's greedy little eyes off the company's greater than 20% growth rate as far as you can adequately see.
Apple also has well over $100 billion in cash, roughly $125 per share. That's reliable. It's selling at about10 times fiscal 2012 earnings estimates, thanks, in part, to factors, like growth in China. The iPhone5, which wasn't available in the third quarter, now flying off shelves in the fourth.
Long-term, there is a lot to start considering in terms of Apple that might not be as pretty. But save that for another day - certainly another week. Short-term, as traders rethink assumptions about a recovering economy that had lifted plenty of stocks undeservedly, Apple will be one of the few safe havens.
More articles by Marek Fuchs »
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A new development, for me, happened yesterday afternoon. I received a notice from ATT that my iPhone 5 has was shipping and I would have it Tuesday and my credit card had been charged. That's one more iPhone in the 4th quarter. No big deal, right?
But...I was told when I ordered it last week that I should not expect to receive it until Oct 21-28th. A friend of mine with delivery expected 2-3 weeks hence has his coming, too. I have no idea how many more were shipped within the last quarter but it seems what ever supply backlogs which were rumored last week may have either disappeared or never were as bad as some wanted us to believe.
Maybe APPL won't disappoint after all. Long AAPL.
Agree with your stance on AAPL.
In Q3, Technology stocks in the S&P 500 scored one of the better performances, with the sector (XLK) rising 7% in price and besting the 5.8% price-return for the S&P 500.
The 71 stocks rose an average of 4.2%, which not only trailed the return of the sector but also lagged the overall market.
What's going on?
Google and Apple is all the story.
The sector was certainly boosted by GOOG's 30% gain and AAPL's 14% jump.
In accordance with this http://bit.ly/Nx1WY8 forecast.
Good Trading!
Once Apple catches up to orders and improves Maps their stock should continue to do well.
No opinion on appl at these levels, not long cause I look for triple digit return potential (which is all but impossible from here) and not short because apple is still too cool for school.
So what I'm referring to is still supply constraint, but you can beat the 3-4 weeks if you have rapid fingers!
When AAPL was at $700ish, many SA writers jump in predicting $800 is just a matter of time. Now AAPL at $666, they are nowhere to be found. I bet that when AAPL recover, they will come out of the wood again.
I was looking through some semi-annual mutual fund reports this weekend and I noticed how many had AAPL at the top of the holdings.
Maybe Wall Street has had enough of AAPL.
Why buy more?
Look at all the crap that the iphone/ipad has replaced- magazines,camera,recor... etc.
now look at all the crap in the home- multiple remotes, wireless gadgets, security systems just a ton of stuff.
Apple TV will allow the ipod (or iphone,ipad) to control all in the house- the security system, entertainment system, climate control system, energy system, cameras etc
and then they can take on face book with facetime expanded.
Apple is only starting
And, those 3 have been growth-free too for much of the last 12+ years; some are even down. Their 3 to 4%+ dividends do not yield enough to make them buys for anyone other than old school. Many newer slow/no-growth stocks yield 7-10% or even more very consistently, so why settle for those old timers?
I'll stick with AAPL and some newer and higher dividend payers.
Convingtonium: misinterpretation still doesn't mean pirota is a 'retard.' Be nice or just keep it civil; this is not a Yahoo post.
Convingtonium: misinterpretation still doesn't mean pirota is a 'retard.' Be nice or just keep it civil; this is not a Yahoo post.
Now I know other phones have had this for a bit, but it's new to me as a dedicated iPhone user and it was free!
As Apple has discovered, the Mac and the iPad have different uses cases (Relevance - Traditional PC's/Laptops vs Tablets). Although they have some features in common, and can access the same ecosystem of value add services, they are different intentionally.
As for "Stinking up the joint" - If my business sold as many of it's new products as Apple did in the 1st week, I would be extremely happy. The problem with Maps will be corrected, as will their Supply Chain issues.
A bigger problems is that the Financial Hype engines need to be a bit more realistic on THEIR expectations. When a company gives it's guidance, it is usually for a reason. In Apple's case, component shortages and supply problems did limit sales of iPhone 5. You can't sell what you can't make and they knew that.
Disclosure - I personally have Apple and Microsoft stock and don't plan on changes in the near-term.
Cold rational logic dictates that this stock will get higher than 800, eventually. Low PE, no dept, fast growth, high profit margins, proven track record on new products, more cash on hand than they know what to do with etc.... Ignore the drama, the fundamentals are strong. Steve was not the only golden goose.
Regarding just the phones issue: calendar year growth has been: 2009: 83%; 2010: 89%, 2011:96%; 2012: 50%,- if sales of last two Q's are 27m and 50m (quite possible)-. It was hard to think, at mid-2009, that Apple would be selling some 140m phones by now. Calendar year 2013: it's also quite possible to have another 50% growth (200m phones), if broader China market is to be reached (and there are plenty of signs of that): China mobile has 700m subscribers, most to be switched to smartphones. A mere 6% of that market share would mean 20% of year's sales estimates is achieved. Healthy growth for year 2014 could be achieved if then India and further penetration in China (and Asia in general) is possible. Granted, it would be difficult to grow higher than 20% by then. But 20% of 200m is still a huge number.
Regarding tablets, it is an undisputed belief that this market will have a quantum growth next years. If Apple is able to retain, say, half of its current market share, a huge number is also guaranteed.
Of course, the company will keep producing new products.One obvious is the much rumored TV; I instead have better bets in the publicity market, as it is obvious that Apple sooner or later will take a lot of ads from Google. That's the real fight Apple and Google have now. If people is bullish about GOOG future, can't see why they wouldn't be as bullish, just in this area alone, about Apple.
We Apple longs are quite concerned about a US$50 retreat from ATH. But, in the long term, I believe this is a necessary pain, since Apple must be cleaned up of Google's and Samsung's dirt; the reason about the maps issue and the supply shortage that is driving the stock down in the short term; in fact, the only real issues regarding the stock right now.
Finally you have the cash thing: Past Q Apple will end with at least 135 U$/share of cash and no debt. To be increased massively in CY Q4. There will be a point where Apple will have to do something with all that money. This is value for share owners waiting to be profited of.
"And though Apple reported disappointing third-quarter results and while you can marshal an argument that it will disappoint long-term, you will not be able, in this week of economic trial and tribulation, to get trader's greedy little eyes off the company's greater than 20% growth rate as far as you can adequately see."
First of all, it turns out I was wrong on my estimated market size (used the market size for consumers, and ignored the market size for companies). After I have updated the estimates, CAGR is closer to analysts estimates (I think roughly 15-17% compared to analysts estimates of 23-24%).
Secondly, there is probably a difference between analysts estimates and estimates by investors (those who actually decide the market price). Investors might be less bullish on Apple than analysts.
My article never tried to argue that Apple will disappoint shareholders over the longer term. But since the long-term prospects of Apple are so hard to determine, this means that Apple is a much more risky investment than the "beta" implies (long-term).
Over the next year (as you point out), Apple is a pretty safe investment.
http://aol.it/U3K67s