Short Apple AAPL

[rovo]

Oct 10, 2011 10:36:27 GMT -5 rovo said:

Let us keep track of the "short Apple" comment made on 06 Oct. The highest price for APPL on 06 Oct. was $384.78, so this will be the price at which the stock was shorted. Using the highest price is in the OP's favor.

Current price = $383.35. Gain/Loss from short = +0.38%.

Currently: Price = $399. Gain/Loss from short = -3.5%

I'm expecting above $425 next week for Apple. $450 is doable. ;D

[rovo]

The following is the first article I've seen on the functions of the new iPhone4s.

technolog.msnbc.msn.com/_news/2011/10/11/8277254-the-early-iphone-4s-reviews-are-in

BTW: APPL at $406 in pre-market activity.

Disclosure: I am long AAPL.

[usaone]

Apple at $406+

[Virgil Showlion]

The following is the first article I've seen on the functions of the new iPhone4s.

technolog.msnbc.msn.com/_news/201....-reviews-are-in

Simple minds...

ETA: (Should clarify that the above statement pertains to the interviewees in the article, not to the poster of said article. )

[rovo]

I'm expecting at least $425 per share before the earnings release next Tuesday and at least $450 by the end of next week. ;D

[usaone]

Oct 12, 2011 11:13:09 GMT -5 rovo said:

I'm expecting at least $425 per share before the earnings release next Tuesday and at least $450 by the end of next week. ;D

I agree. If the price rises above $440 I will be selling a portion of my APPLE stock.

$$$$

[flow5]

Jobs reviewed a lot operations, but he wasn't the be all & end all. He unleased creativity, but may have also suppressed some creativity.

Apple has an established corporate culture. The key is to watch if there is an exodus in engineering talent. Only then will the company be in trouble.

[rovo]

I'm posting this current article because it "confirms" Virgil's thoughts that nobody wants an iPhone4S.


Apple’s New IPhone Sells Out at U.S. Carriers By Scott Moritz - Oct 13, 2011 8:54 AM ET

Apple Inc. (AAPL)’s latest iPhone has sold out for pre-order at AT&T Inc. (T), Verizon Wireless and Sprint Nextel Corp. (S) according to the carriers’ websites, signaling customer demand even before it goes on sale in stores tomorrow.

Sprint and Verizon Wireless showed no remaining iPhone 4S stock available for pre-order on their websites. On AT&T’s site iPhone buyers are given a delivery-time estimate of three to four weeks rather than the one to two days, when pre-orders began Oct. 7.

The sellout signals robust demand for the Apple device and should help boost revenue for the wireless carriers in the years ahead, said Roger Entner, an analyst with Recon Analytics in Boston. Apple, based in Cupertino, California, said this week that it hit a new sales record of 1 million iPhones sold in the first day.

“It looks like another blockbuster launch for Apple, only this time with three carriers,” said Entner. Entner estimates that about half of the early iPhone buyers are “Apple aficionados” who buy the new iPhone every year, and the other half are a mix of people upgrading from older smartphones and those new to the category.

The iPhone launch, along with new phones that use Google Inc. (GOOG)’s Android software, should tip the balance to more than half of mobile phone customers using smartphones, Entner said.

“With this iPhone launch, we will have broken through the 50 percent penetration level,” he said in an interview. He estimates smartphone penetration was 43 percent at the end of September.

[rovo]

Let us keep track of the "short Apple" comment made on 06 Oct. The highest price for APPL on 06 Oct. was $384.78, so this will be the price at which the stock was shorted. Using the highest price is in the OP's favor.

Currently: Price = $405. Gain/Loss from short = -5.0%

5% loss is still in the range of noise for this stock.

[Small Biz Owner]

FYI I sold at $378.25 Just where it happened to be at the time of my transaction. Moved into my short position at the same price $378.25.

I really expect one more possible uptick when the I-phone 5 is released, then a long downhill from there. I admired Steve Jobs a lot, but fully expect the same results as the last time Apple was without him. From profits to loss in just a few short years.

I'm expecting at least $425 per share before the earnings release next Tuesday and at least $450 by the end of next week.

$450? We shall all see next week. Good luck.

[rovo]

$450? We shall all see next week. Good luck.

$450 is just a round number and I don't really expect it to hit $450 on the nose next week. Let's call it above $425 and below $475.

ETA: If the stock hits above $450 next week, then that would be the time to enter a short position for a short term trade.

[Small Biz Owner]

What I see as the dilemma for Apple. I-phone competitors with similar and possibly better products soon?

BTW, Neither of these 2 competitors are small start-ups

Windows Phone - Microsoft
Windows Phone is the only phone with mobile office, Xbox LIVE, mobile apps, and more.

The New G2 Google Phone Powered by Android | 4G Phone |
Powered by Android, the new T-Mobile G2 with Google phone is the first smartphone designed for the blazing-fast 4G speeds of our new network. Google Voice gives you one number for all your phones

Apple profits per product posted below...

Apple Division %
iPhone 53.7%
Macintosh 12.2%
iPad 11.8%
iTunes & iOS Apps 4.3%
iPod 1.7%
Apple TV 0.3%
Cash (Net of Debt) 15.9%
TOTAL 100%

[flow5]

"but there is a superabundance of anecdotal evidence that he was very difficult to deal with, with a fierce temper, a callous impatience and an uncompromising nature. The world is not changed by sweet people. It is changed by tough people"

www.smh.com.au/opinion/society-and-culture/monopoly-markups-sour-story-of-apples-core-20111009-1lfrv.html

[usaone]

Apple at $421.

[rovo]

APPL is running a tad ahead of my expectation of $425 just prior to the earnings announcement. It closed today at $422. ;D Earnings are to be announced Tuesday after the close. Analysts estimate $7.40 but my estimate is $9.00. After earnings stock price of at least $450 by next Friday (conservative).

[Virgil Showlion]

I saw the Apple earnings miss today. Ouch.

Looks like it's going to close at 398.

Biz must be happy (if he in fact has a short position in AAPL). Reggie Middleton was out bragging today as to why Apple earnings would be a huge miss, why Android is eating Apple's lunch, and why the stock price is still headed lower. To wit:

I have received SO MUCH flack over the last year for pointing out the obvious FACT that Apple's phenomenal growth will be hit by Android's extra-phenomenal growth, it has been borderline disheartening. Well, the time is hear folks, and as is usual, logic, common sense and rational thinking rule the day once again.

The results should be interesting, if not immediate, for many Apple investors and consumers are beyond loyal and ede to borderline fanatic. This portends much more irrational emotion in decision making and potentially unnecessarily drastic actions in the end. What do I mean? Well, Apple is purportedly just under 7% of
the NASDAQ. If the Apple religion falls out of fad... Well, look out below! This may not happen immediately, for the love affair is truly torrid, and all sorts of excuses will be made. At the end of the day (or fiscal year, to be more accurate) the reality is bound to hit that Apple is a C corporation like everyone else and is subject to market pressures and competition, and truly does not fart fairy dust.

...

Simple math, simple business logic, simply common sense, yet the Apple hordes attacked relentlessly. Listen, what Google has created to compete with Apple, RIM, MSFT and Nokia, was not a new technology - but a new way of doing business. Less than free was their new business model and it proved to be pretty damn effective.

Margin compression follows a slip in sales due to competition. You see, in order for Apple to maintain its unit growth, it wiill have invest more into the product, cut costs, or both. Any scenario leads to margin compression. Since I have written so much on this topic, I will not rehash, but simply point to the prophetic post I made two weeks ago in calling for what I considered to be the obvious: Sliced Apple Margins For Dinner?

In the meantime, let's parse today's news event: Apple Misses Big on Earnings, Revenue; Shares Tumble

Apple posted a rare miss on both earnings and revenue as far fewer iPhones were sold during the quarter than expected. Shares tumbled after-hours.

Again, it's Apple's expectations that will be the eventual undoing of this company as an investment.

Your thoughts, rovo? Biz owner?

[Deleted]

Th short is still underwater, but getting closer to being profitable.

[Virgil Showlion]

I'm posting this current article because it "confirms" Virgil's thoughts that nobody wants an iPhone4S.

When and/or where have I said anything like this?

I'm not exactly an Apple fan, and I posted an article suggesting early reviews that the 4S was a yawn in terms of having no significant new features, but I've never stated or even insinuated that Apple cultists would give up their obsession. In fact, most of my comments thus far have been bemoaning the fact that people will buy a $400.00 upgrade just because Apple tacks some stupid bells and whistles on.

My view of Apple users is neatly summarized by The Oatmeal.

[usaone]

Small biz said he sold already.

[rovo]

Hey Virgil,

The article you posted made me go and look at the beginning of the post to make sure it was you and not Decoy doing the posting.

I can see by the tone of your article that anyone trying to explain why Apple missed and saying it was a one time event will be considered too avid (or is it rabid) to be believed.

Yes, AAPL missed on revenue and earnings. Here is an excerpt from the release.

Apple® today announced financial results for its fiscal 2011 fourth quarter ended September 24, 2011. The Company posted quarterly revenue of $28.27 billion and quarterly net profit of $6.62 billion, or $7.05 per diluted share. These results compare to revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share, in the year-ago quarter. Gross margin was 40.3 percent compared to 36.9 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter’s revenue.

The Company sold 17.07 million iPhones in the quarter, representing 21 percent unit growth over the year-ago quarter. Apple sold 11.12 million iPads during the quarter, a 166 percent unit increase over the year-ago quarter. The Company sold 4.89 million Macs during the quarter, a 26 percent unit increase over the year-ago quarter. Apple sold 6.62 million iPods, a 27 percent unit decline from the year-ago quarter.

From what I have been able to find, it appears the problem was with the iPhone sales. They sold 17.07M phones but the expectation was for 23M to be sold. I think there are a some plausible explanations for this and I even have my own explanation.

My explanation. The iPhone4S was late in introduction as it was expected in late August. There must have been either a manufacturing glitch, some last minute software change, or a last minute feature added causing the delay. The pipeline of Model 4 ran dry because of the switch-over in production to Model 4S and the multi-week delay.

Apple expects earnings of $9.30 for the calendar 4th Quarter, up from the reported $7.05 just reported. And, for the record, Apple's projections for the just reported quarter were in the high $6 range.

I think we are beginning to see a change in the way Apple makes projections for the future. Historically Jobs just threw a low number out there without regard to accuracy. The new projections appear to be more in line with reality and give us investors something to bank on without having to add 20% to 25% to it and cross our fingers.

This next quarter will, in my opinion, be a telling quarter. If they meet or slightly beat the numbers for Q1 (current FY quarter) then confidence will be restored in the company and the stock price. My projections for the current quarter were $10 but I will now defer to the company's projection of $9.30 (but I'm still thinking $10 ).

VALUATION: My expectation for FY 2011 is at least $40 per share in earnings but not to exceed $50. If I assume $40 per share and a low PE of 13, then share price is $520. A more realistic approach is $44 per share in earnings and a reasonable PE of 15, then the share price is $660. BTW, I'm still expecting a share price of between $450 and $500 by the end of this calendar year.

[usaone]

K for Rovo

Buy on the dips.

Buying at $398 is a STEAL.

[domeasingold]

USA
Bought three weeks ago at 398. Where am I now? Will hold until next reporting period.
Thanks ROVO. This whole story makes no sense. Analysts aren't anal for nothing. How can a company make that much money in a quarter and then be considered risky?

[usaone]

Did you sell any at $425? Like Rovo said it should hit $450 or higher.

If you get cold feet start selling at $430 or so.

[usaone]

I would sell BEFORE they report Q4 earnings.

[domeasingold]

You may be on to something there U. If it goes as high as 430, profit is half a Z06. Maybe I should hold out for 460? or 470 = Carbon Edition.

[rovo]

dome, Don't panic. Give it some time to sort itself out. I expected to see $410 today before the entire market took a turn downward. The "beta" on AAPL is 1.27, meaning it reacts to the trends at a higher rate than the general market. At least hang in there for a few more weeks as I think it will rise nicely during that time. My loss from yesterday to today on AAPL would have paid completely for the Z06+.

[Virgil Showlion]

I can see by the tone of your article that anyone trying to explain why Apple missed and saying it was a one time event will be considered too avid (or is it rabid) to be believed.

Not at all. I just happened across the article while perusing ZH and thought you might be interested since you were predicting $9.00 per share.

I won't pooh pooh your Q4 predictions since all indications are that Apple is going to have a blowout fourth quarter with their iPhone 4S release. My concern would be longer term. Such as: a stock price of $400.00 is based on $7.00 earnings per share is based on ~17 million iPhones sold. Your target earnings, assuming proportional sales growth in all units, would imply sales of around ~22 million iPhones (~8.2 m domestic) and ~14 million iPads (~5.2 m domestic) sold. Meaning that in slightly over 9 quarters, every taxpaying man and woman in America will have to buy at least one iPhone or iPad to sustain the numbers.

Maybe Apple fans will shell out the dough to buy an Apple product every 2 years, but every taxpayer in America? I doubt these numbers would be sustainable even if Apple had absolutely no competition. And the same thing goes for international sales. Apple products aren't exactly cheap and there are a freakin' lot of Android tablets and phones coming onto the market now. Apple will have to make a lot of headway into new markets as their customer base is eroded away by cheaper products, and they'll have to milk their loyal fans for yearly upgrades.

In short, Q4 may (and probably will) be a bumper quarter for Apple. I still think that their earnings per share over the next nine quarters are going to average less than $7.00, however, and if P/E stays the same, Apple will be trading at or below $400.00 24 months from now.

JMHO

[usaone]

I may sell a chunk of Apple just before Q4 Earnings are reported Virgil. It depends on the timing of the IPad 3 release.

[rovo]

I just stumbled upon this article by Jubak about Apple.

Exactly where did Apple miss?

Launching the iPhone 4S in October cut into quarterly sales but also allowed the company to raise guidance for the current quarter.
By Jim J. Jubak on Wed, Oct 19, 2011 1:31 PM
Serves Apple (AAPL -5.59%) right for selling 4 million iPhone 4S handsets last weekend.

After the market closed Tuesday, Apple announced that anticipation for the new phone cut into sales for the fiscal quarter ended in September and held the company to a 54% gain in earnings.

That kept earnings per share to just $7.05, well below the $7.38 Wall Street had expected (but up from the $4.64 a share reported in the fiscal fourth quarter of 2010). Revenue climbed 39% to $28.3 billion. Wall Street projections had called for revenue of $29.7 billion.

The iPhone problem started with Apple’s developer conference in June, when the company introduced a new mobile operating system and set off rampant speculation that a new phone was in the works.

Well, that was the trouble. The longer the company put off actually selling a new iPhone, the longer it would cannibalize current iPhone sales and the less time the company would have for sales of a new phone to make up some of the difference.

One analyst calls Apple's earnings miss a "black swan event" in the following video.

money.msn.com/stock-broker-guided/article.aspx?post=fb0b40e6-a5db-47ff-96a4-91bb1e56b8a6


From an earnings-timing perspective, putting the iPhone 4S on sale at the beginning of October was a good way to maximize the damage to sales in the fiscal fourth quarter.

Apple wound up selling 17.07 million iPhones in the quarter, versus Wall Street expectations for sales of 20 million iPhones.

Other parts of Apple’s business did extraordinarily well. Sales of Mac computers, for example, were up 26% year to year. Not bad when the personal-computer industry is forecast to grow by 4%.

And those iPhone sales lost to the fiscal fourth quarter aren’t exactly lost forever. Apple raised its guidance for the first quarter of fiscal 2012 -- otherwise known as the last three months of 2011.

The company projects earnings of $9.30 a share for its fiscal first quarter, significantly above the Wall Street consensus of $8.97. Revenue will come to $37 billion, above the Wall Street consensus of $36.64 billion. Gross margins in the quarter will climb to 40.3% against the Wall Street consensus projection of 39.7%, the company projected.

We all know Apple can’t possibly show this kind of growth in revenue and earnings forever. But that eventual return to earth is built into today’s stock price.

Apple sells for just 15.3 times trailing 12-month earnings per share. Not pricey at all, considering that the 54% earnings growth rate in the just-completed quarter or that the computer sector as a whole, where growth rates are more like 5% than 50%, trades at a multiple of 14.1 times earnings.

On projected 2012 earnings, Apple trades at a multiple of just 12.7. That’s ridiculously cheap -- unless you think there’s no market for an iPhone 5 (with 4G capability) or an iPad 3.

I’d use Tuesday’s disappointment as a buying opportunity, especially if it leads to something more than Wednesday's 3.4% drop. In fact, if the disappointment drives the price down further, I’d probably add Apple to my Jubak’s Picks portfolio.

[Virgil Showlion]

... We all know Apple can’t possibly show this kind of growth in revenue and earnings forever. But that eventual return to earth is built into today’s stock price. ...

I really, really don't think it is.