Apple Turns To Applesauce
Absolutely astounding. AAPL is getting beaten into oblivion, and I for one couldn’t be happier as I still love this company, and am currently out of the stock.
In short- yesterday’s earnings report was awesome- They beat the highest estimate by $.14 per share. $9.6 billion in revs and $1.6 billion in profits- AAPL ended the quarter with $18.4 billion in cash- up $2.7 billion from the previous quarter. Yes, they can pay the bills.
MAC sales were way ahead of estimates, but iPod sales poked analysts in the eye and came in a bit light. (some are guessing the iPhone is eating into iPod sales- you don’t need an iPod if you have an iPhone)
Here’s the rub- Apple forecasted a little downturn in Q2 (calender Q1)- they are looking for $6.8 billion in sales and $850 million in earnings. Pathetic. Why bother even opening the doors- just kidding.
Wall Street is freaking out over the stock right now, and AAPL is getting absolutely hammered. The traders are no longer in charge, but the margin clerks are, with both fund managers and individual investors being blown out of AAPL left and right.
You might think of AAPL as a technology company. I think of it as a consumer electronics/digital revolution company. And, I still believe there is a lot more growth ahead.
Where are we headed? You are not going to believe this, but here’s what the chart is telling me:
Yes folks- here’s where I believe the stock has a chance to go. Believe it or not, $108.50 is my number for an absolutely screaming, irresistible buy. There are no assurances it will get there, but there’s a chance.
Here’s a monthly look at the stock, going back to late 2006 when the stock was $50, and Wall Street just started to understand the power of the digital entertainment revolution- AAPL is the poster child for that transformational change.
I believe, in this irrational market environment, there is a chance the stock will give back a whole 61.8% retracement of that entire move. Once the .382 level gave way, the .618 level moved into the crosshairs.
There will be many more years of growth ahead for AAPL- the new notebooks are unbelievable, and iTV will start to grow.
Since we are looking at a monthly chart, you have to think in monthly terms. Another words, if you take the plunge at that level, think about where the stock will be in months, not days or hours. Put on the mute button and cancel out the ambient noise about the sky falling.
We might not get there, but if we do, I will be ready to take advantage of the situation. If both the stock and the market stabilize, I will revisit the chart.
This might seem a little far fetched, but that’s the market we are in right now.
Comments and questions are welcome.
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Okay, now that we’ve had a few MORE weeks since the high and we are starting to break out of the 117-130 trending range, do you see this as a bottom and perhaps Apple can float up from here? Or, do you see this as just a pause before falling further? Perhaps resistance at 140?
Editor: Very good question and the stock never made my threshold of $108. Tough to say what the ceiling would be now, but it might be time to start accumulating on down days. I believe there is a lot more volatility to come, so I wouldn’t chase anything yet. I bought some Lehman puts on Friday.
Comment by Daniel — 3/20/2008 @ 3:02 pm
Now that we have had a few weeks since the high where do you believe low will be for AAPL? Thanks
Editor: Worth having a look. Perhaps $108 is not going to be the bottom. Seems like the market as a whole is trying to firm up. It’s really not a call on AAPL, it’s a call on the length of this bear market. It might have run its course by March, and we’ll have a spring rally. Will try to get to that issue next week. I have to travel this week, but very good question.
Comment by Brooks — 2/11/2008 @ 9:30 pm
I agree that Apple has great products, but in a recession people might stop paying almost a 100% premium for a thing they get for half-price from Sony, Dell, HP or you name it….
I am quite sure we will see buying opportunities below $100. If you draw the longterm trendline from mid-2004 (when the stock broke out over $20) you see the primary uptrend now ranging at about $80. I think this trendline will be tested.
Fundamentally, AAPL still trades with a P/E around 28, while DELL is 15 and HP is 8. Put that in your pipe and smoke it.
Editor: Perhaps the stock will be headed that way. The company will probably earn $5 this year- near $100 is my number, but it could be on its way to $80. However, I don’t believe you can compare AAPL to DELL or HP- I’m pretty sure DELL and HP haven’t sold 4 million revolutionary new wireless phones, nor have anything to do with the digital entertainment revolution. On the PC side, look for AAPL to eat into Dell and HPs market share. That’s why I don’t believe in those PE comparisons. Comparing apples to lemons.
Comment by MK — 1/28/2008 @ 2:43 am
I am shocked to learn you sold all your apple when you were so bullish!!
Editor: I’m a bullish realist- they are killing all the consumer/tech stocks that were hot in 2006-07- taking them down to much lower level. I’m still very bullish on the company, but not the stock. $108 is now my number to jump back in. It might not get that low, but I’m going to stay on the sidelines and see.
Comment by M Cohen — 1/27/2008 @ 9:11 am
I notice you sold all of your Apple holdings. I have 125 shares that I have watched drift down from an average of 175 to their current level. Based on your comments today I feel like selling my shares and shorting it. Am I getting too anxious?
Editor: If you followed my BLOG on the day of the earnings release, you know I sold out at $173. If you are still in, I would hang in there, and wait for stabilization to add to my position. I don’t know if it’s going to continue to get killed. I’m just hypothesizing what might happen in an extreme situation, and where the stock might be a “mortgage the house” buy.
Comment by Ralph Vaccaro — 1/23/2008 @ 4:09 pm