To OTC Journal Members:
 

iPhone and Apple (Nasdaq: AAPL): Where to From Here?

Remember the March 31st Edition entitled Apple's Trojan Horse? The edition covered Apple's next breakthrough in the digital entertainment revolution: iTV, which I believe will blow away all other downloadable movie solutions. iTV will make iTunes and associated IPod sales look like a warm up for the main event.

In that edition, I predicted AAPL would be good for a 50% move over the next 6 months. The stock was in the $93 range that day, so a 50% move would put us at about $140 by the September to October time frame.

Since that day, AAPL has made a high of $127, and is currently in the $121 range. This means I was more than halfway to the target - at the high AAPL had grabbed $34 of the $47 move I predicted only half way through the time frame.

It is too late to buy? No way. Is it the right time to buy? No way. Do I still believe it will trade to $147- no way- I am revising my view. I believe AAPL will trade to $200- perhaps as early as late this year or into 2008.

The press was going crazy over the iPhone last week as units became available on Friday, and the media was having a ball interviewing ding bats were were waiting in line at overnight at their AT&T store to get one of the first 3 million available.

The early reviews have been generally positive, with some moderate complaining about the speed of web access. Apple is using the wrong platform for internet access, but that will no doubt be corrected.

AAPL is going to have a big win with the iPhone- nobody does digital better than AAPL. Ever since Steve Jobs came back to the company, they have been kicking hind end and taking names in this space.

While all the analyst are busy projecting how many phones they will sell if they get 1% of the world market for cell phones, and blah, blah, blah; nobody is talking about another pending growth driver waiting in the wings.

In October Apple is introducing the next generation of desktops and notebook computers. They will run on the new Leopard Operating system, and also run Windows Vista. So- if your Mac runs Vista, your iPhone will no doubt integrate with your Outlook software. 

I have been reading some consumer surveys of late which suggest many consumers are looking at the next generation of Macs as an opportunity to abandon their old, cranky PCs. I can't say as I blame folks- if I get one more of those darn Microsoft error messages I believe I will yak all over my keyboard. I don't have a MAC, but from speaking to folks that do it seems they run very well. I might get one in the Fall.

Here's what's going to happen- the explosion of iPhone sales is going to fuel the next generation MAC desktop and notebook sales. Do you think it was a marketing accident that the iPhone was introduced a few short months before the next generation of MAC's? Think again. Do you think all the consumers of those spiffy new hi tech iPhones are going to want to integrate them with their tired old PC? Not likely. 

So, in an interesting ironic twist, I believe the phenomenal success of the iPhone will push sales of the next generation MAC desktops and notebooks. iTV and iPhone will push MAC sales. Can you see Dell (NASDAQ: DELL) as a great long term short? I do. 

Then, as we roll into 2008, iTV sales and movie downloads (which integrates with your MAC desktop and notebook for your home entertainment) will bring another major leg of sales and earnings growth. The analysts and the media will be gushing about those when the time comes.

So, if you are interested in this large cap idea, when do you buy the stock? Certainly not today. The stock has been running up into the iPhone roll out. Time to let it cool off and let some profit takers who bought on mystery sell on history. Here's the chart:

I made this a weekly chart so I could fit in all the information I wanted you to see. This means each bar represents one week in time, not one day. 

You can see the entry point I suggested when I wrote about the iTV back on March 31st. The stock has made a great move since then. However, in my view this is just the beginning of another one to two year run.

Here's what you want to watch for now. The stock should start coming back down now that the iPhone is out. I'm looking for the stock to trade into the $113 to $115 range. At that point, if you don't own it some way or somehow, it would be a great time to start accumulating.

If we are lucky enough to see it trade into the $104 to $105 range, that would be the time to load up the boat. 

Perhaps I will set up a BLOG on AAPL so people can share their viewpoints. Most of the commentary from my initial edition was from investors who thought I was nuts. There were a lot of "valuation" comments. So far, I'm winning the argument on this one hands down. This stock is overvalued, and in my view it is going to stay overvalued and get a lot more overvalued over time.
 

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