The ‘What’s Going On?’ AAPL Strategy Room thread

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    Posted: 07 May 2010 05:53 PM

    AAPL 270 the other week to AAPL 200 yesterday to AAPL 235 right now.

    It’s a wild ride for AAPL and the broader markets these days, isn’t it?

    I figured it wouldn’t be a bad time for us to “take stock” of what’s happening, since AAPL’s fall to the 70s wasn’t so long ago.

    Nokia’s suit was just a convenient excuse for the Uptick Rule-free short-sider investors and/or panicky “AAPL’s too high, sell now!” crowd to bail.  No comment whatsoever on the P&G foolishness yesterday (well, maybe just one - IMHO, only a complete idiot would blame a 10% Dow drop on Greece’s summer of discontent and its assorted potential ramifications).

    It feels like 2007-08 all over again, but much as I hate to say it, if AAPL continues to get pounded while certain SEC senior staffers keep on with the porn surfing at work, at some point soon I’m gonna be backing up the truck to pick up more AAPL (apologies to all offended by Jim Cramer).  Obviously even the common stock game carries huge risk, but for those with the stomach for it, I can’t see anything but brighter days and much higher share prices for Apple in a 3-5 year horizon.

    So, what’s everyone thinking?

    [ Edited: 07 May 2010 06:00 PM by Mav ]

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    Thanks, Steve.

         
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    Posted: 07 May 2010 06:07 PM #1

    There will be a “new” stabilization apparent in a couple of days.  That will bring a willingness to invest cautiously.    I’d consider investing a tiny portion at high risk.

         
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    Posted: 07 May 2010 06:28 PM #2

    I think the “sheep class” of investors, along with those short-siders, the bears in general, will have their day as the ever-reliable media (/sarcasm) overhypes the situation in Greece.

    It’s disgusting that the austerity doctrine led to any loss of life in the first place, but this kind of market panic isn’t entirely rational.  No one’s arguing that this bailout deal is bad for the EU, but this sense of panic is borderline at least.

    That aside, I’m not sure we’ll stabilize anytime soon, especially the way AAPL can trade sometimes.  Y’know, NASDAQ down 1%, AAPL down 3%.  It’ll stay bumpy for a while, between Apple’s earnings releases, special events, and sales milestones.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
  • Posted: 07 May 2010 08:12 PM #3

    The madness of crowds. I have no idea when the emotional selling will end or how low Apple may go. It’s obvious to me that Apple’s next 12 months will be incredible. I expect YOY earnings growth in 12 months to be a minimum of 50% and possibly greater than 100%. The stock is priced at 20 times trailing earnings with $46 per share in cash and marketable securities, or 16 times trailing earnings net of cash. In other words, I believe AAPL is trading at 8 to 12 times forward earnings (net of cash). This is unbelievably cheap. Why are the next 12 months special? The I pad will sell over 3 million units this quarter. 3G Ipads continue to sell out across the country. That’s 2 billion in revenues that did not exist in any prior quarter. They will sell 3 million units in the US this quarter. When the rest of the world is on board Apple will probably sell 5- 6 million per quarter which is about 4 billion in new revenue per quarter. This is a major worldwide product. Apple grew their earnings 90% YOY last quarter before the introduction of the Ipad. Apple’s sales and earning were already accelerating before the Ipad. Apple will introduce the new Iphone in early June and sales will begin shortly thereafter. This will be a major product release that will turbo charge their Iphone growth which already was growing over 100% YOY. Apple may make additional new profits in advertising. This is not in the numbers. Apple is selling higher priced applications on the Ipad. This has not been factored in their numbers. Apple has stated that they also have new products in the pipeline. It’s obvious that next year will be incredible. Once we get past the crowd/ fear mentality, this stock will rebound more sharply and quickly than any other large cap stock. We have had contagion problems before. They eventually pass and growth resumes. This time, there is substantially less leverage in the system. Everyone is afraid of another 2008 market. This time our banks are well capitalized with less leverage and company balance sheets are strong, and top and bottom lines are growing. Employment is finally growing. Because everyone is afraid of a re-occurrence of 2008 it’s precisely why we won’t have one. If you have a time frame of 3 months or longer and don’t have to sell than you should sleep very well. Market timing is dangerous. If you get out and miss getting back in you will regret it. This is the opposite of irrational exuberance.

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  • Posted: 07 May 2010 08:23 PM #4

    Nice level headed post ... welcome reading in the middle of all of this market mayhem.

         
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    Posted: 07 May 2010 09:16 PM #5

    the DING DONG of the day ANALYST AWARD goes to…..

    Fri, May 07, 2010 - 08:12 PM EDT ?  AAPL: 235.86 (-10.39, -4.22%)  |  NASDAQ: 2265.64 (-54.00, -2.33%)

    Analyst slaps $126 price target on Apple

    Friday, May 07, 2010 - 03:42 PM EDT

    The few lucky investors that purchased Apple at $199 following the mysterious electronic plunge in the markets Thursday made a quick 20 percent return as the stock closed above $240. One of those buyers was definitely not Edward Zabitsky. He believes the stock is going to $126 and recommends selling it short,” John Melloy reports for CNBC.

    “Zabitsky, who founded his research firm Active Communications Integration in 1997 to consult the telecom industry and institutional investors, believes one of the most-favored stocks on Wall Street will decline nearly 50 percent because of competition from phones using Google?s Android software and because of a double dip in the American economy that will hit luxury brands as a consumer and government debt bubble bursts,” Melloy reports. “‘Apple is a luxury brand and in the past has correlated very well with LVMH Moet Hennessy and Christian Dior,’ said Zabitsky, who is based in Toronto, in an interview today. ‘America didn?t get rid of the bad debt, the government just took it over and consumer credit is trending down.’?

    Melloy reports, “To put his $126 target in perspective, the average forecast from Wall Street analysts is $300.”

    For what it?s worth, Zabitsky declined to reveal his models that get him to the $126 figure, but said it was based on much lower iPhone prices hitting margins. The increasing capabilities of phones made by HTC and the end of the AT&T exclusivity contract will be the catalyst for that plummeting profitability. When the iPhone came out it was grossly different,’ added the analyst. ‘Apple has raised the bar on what?s normal, but other phones are easily narrowing the difference because web technology is easier to program.’”

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  • Posted: 07 May 2010 11:50 PM #6

    Edward Zabitsky can be safely awarded The :dunce: of the Year Award in early May.

         
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    Posted: 08 May 2010 01:14 AM #7

    Mercel - 08 May 2010 02:50 AM

    Edward Zabitsky can be safely awarded The :dunce: of the Year Award in early May.

    Are you going to short from here Mercel? I doubt it. The one thing my old age has taught me is that the market can change direction at any time. The Greece thing has been drawn out for a long time. IMO it should have taken 2 days. The market had gotten ahead of itself and the huge earnings gap was a given that it would be filled. Many of us mentioned this. I sold half my position last week and regret not selling all. Yesterday I tried to buy back 100 shares around 240, by time I hit the send button it had gotten up 246 or so. (Fidelity was insanely slow) The thing is, I don’t feel bad about it. I am going to hold and will be bailed out from this position and will then hold the difference between the sell& buy.

    I remember in late Dec of 2007 many of us were talking about AAPL going to 230 after Jan earnings. (There was a famous wager made back then) I think it was Dec 27/28 when AAPL hit 202.96. It would be an eternity before it would get back there. I do remember AAPL giving horrendous guidance back then. During 2008 we had a nice rebound up to 190’ish before all hell broke loose. I remember selling maybe 200 shares around then. Boy I wish I had a do over on that and had let them all go. In 2008 the writing was on the walls and most of us felt bullet proof with AAPL. I have fun in the forum and love to see the momentum trade, but many here were putting on the brakes and trying to help by stating the obvious. Plato, Runedge and Bigbird were waving their flags. How many times are we going to have to go through these heartaches before we learn to listen to all opinions? MtDoc, I miss your opinion on the market (not your politics), I can actually separate the two. Runedge, I would normally insert something funny here, but now is not the time. Ern, Why oh why could you not have been so obnoxious? smart guy with very good TA skills. My point is, we have lost many good members because they were not 100% bulls. This has to stop.

    Now for my opinion on where we go from here, we have completed our 10% correction. Indices and AAPL. I think Greece was a smokescreen and somehow over the weekend things will start to change. I pray the oil spill is covered, (last time I looked it was not far from the bottom) this is weighing on the market. I am not saying Monday will be an up day, but I do think we have a 300 point up day in our near future. Hell, CITI posted a profit last qtr, if they can make money anybody can. as DT likes to say, the market climbs a wall of worry. It is time to start climbing again. On Monday I plan to re-buy my shares of AAPL then sit back and watch the best company get back to making money. As usual, I am not trying to sway anyone into doing anything and I wish everyone the best.  :apple:

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    Posted: 08 May 2010 05:23 AM #8

    mbeauch - 08 May 2010 04:14 AM

    ... I think Greece was a smokescreen and somehow over the weekend things will start to change. I pray the oil spill is covered, (last time I looked it was not far from the bottom) this is weighing on the market. I am not saying Monday will be an up day, but I do think we have a 300 point up day in our near future. Hell, CITI posted a profit last qtr, if they can make money anybody can. as DT likes to say, the market climbs a wall of worry. It is time to start climbing again. On Monday I plan to re-buy my shares of AAPL then sit back and watch the best company get back to making money. As usual, I am not trying to sway anyone into doing anything and I wish everyone the best.  :apple:

    Thot you talked to runedge over the phone to get his bearish thoughts.  Did he change his bearish stance or after listening to him, you think his concerns are merely wall of worries?  I noted you flip flop from bullish to bearish back to bullish over a short (no pun :-D intended) span of two weeks.


    Mercel - Noted you’re now bearish.

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  • Posted: 08 May 2010 08:14 AM #9

    Mace - 08 May 2010 08:23 AM

    Mercel - Noted you’re now bearish.

    I don’t think I am.  I’m holding.  I am hopeful the weekend will settle nerves and many will see that things were overdone.  It would help if there was a better explanation for what added to Thursday’s plunge.  We need more specifics on the cause, and the “fat finger trade” isn’t cutting it.  The uncertainty of it all needs to be removed.

    My confidence in the market needs to improve.  My confidence in Apple has NEVER been higher.  I’m siding with the latter, for now.

         
  • Posted: 08 May 2010 08:29 AM #10

    mbeauch - 08 May 2010 04:14 AM
    Mercel - 08 May 2010 02:50 AM

    Edward Zabitsky can be safely awarded The :dunce: of the Year Award in early May.

    Are you going to short from here Mercel? I doubt it. The one thing my old age has taught me is that the market can change direction at any time. The Greece thing has been drawn out for a long time. IMO it should have taken 2 days. The market had gotten ahead of itself and the huge earnings gap was a given that it would be filled. Many of us mentioned this. I sold half my position last week and regret not selling all. Yesterday I tried to buy back 100 shares around 240, by time I hit the send button it had gotten up 246 or so. (Fidelity was insanely slow) The thing is, I don’t feel bad about it. I am going to hold and will be bailed out from this position and will then hold the difference between the sell& buy.

     

    I traded AAPL once, and my lack of patience hurt:  I sold some in the PM and bought back too early.  However, my patience n the market is being tested.  I do think Monday will see improvement.  The $64,000 question:  “The trend is your friend.”  Was last week a trend?  I don’t think so.

    Edit: My sale and repurchase in the PM was profitable, but I should have waited for the bigger decline during the regular session.

    [ Edited: 08 May 2010 12:04 PM by ByeTMO ]      
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    Posted: 08 May 2010 11:16 AM #11

    Mace - 08 May 2010 08:23 AM

    Thot you talked to runedge over the phone to get his bearish thoughts.  Did he change his bearish stance or after listening to him, you think his concerns are merely wall of worries?  I noted you flip flop from bullish to bearish back to bullish over a short (no pun :-D intended) span of two weeks.

     

    Mace, I did talk to Tony, he has become a good friend over the years. I have to give him all the credit in the world for being spot on. Sometimes we agree, sometimes we disagree. Tony has one goal, capital preservation. His time-line is different than most in the forum and this is sometimes hard to understand. He has stated many times that he is a long term Bull, as most of us here are. Back in March he had turned Bearish, I had also. Before I went to Vegas I liquidated an account, I would only have done that if I felt the time was safe. Turns out that is when things started to go up with AAPL, made a killing with my other stocks, but lost $5/sh in AAPL. When I got back I turned bullish and rode the market up. Last week I sold half my position in AAPL because I was feeling uneasy about the market, yes I had turned Bearish and now I have turned again. I am sorry if my flip-flopping is a problem, I change my mind when I feel it necessary.

    Mace, Bulls are optimist and Bears are pessimist. If this were a chart I would definitely be called an optimist. I do try to look for the good in things. The world needs a few more optimist.  :innocent:

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  • Posted: 08 May 2010 11:58 AM #12

    On Wednesday morning I sold to close all of our LEAPS - 2011 and 2012’s.  Held shares.  Had gone back into the LEAPs back in late Jan early Feb when Apple was just bounding around $190-$200, as I recall.

    Tiptoed back in yesterday afternoon with a small Jan 2011 $230 position.

    Still holding lots of cash.  I feel like I dodged a major bullet, and frankly am anticipating another opportunity.  Will slowly ladder back in, and will not get that crazy go all in feeling with the first wee move up.

         
  • Posted: 08 May 2010 01:09 PM #13

    The markets will like the news that the Europeans have reached an agreement to defend the Euro (“Whatever it Takes).  See Here!

    It may even incite some panic buying.  We shall see Monday.

         
  • Posted: 08 May 2010 03:35 PM #14

    SEC is apparently evaluating steps to improve the transparency on trading.  I’m not qualified to evaluate whether this is THE solution, or ONE among others that need to be adopted to prevent a recurrence of Thursday’s plunge. 

    See here for your reading pleasure.

         
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    Posted: 08 May 2010 04:43 PM #15

    Mercel - 08 May 2010 06:35 PM

    SEC is apparently evaluating steps to improve the transparency on trading.  I’m not qualified to evaluate whether this is THE solution, or ONE among others that need to be adopted to prevent a recurrence of Thursday’s plunge. 

    See here for your reading pleasure.


    Mercel, I saw a video of the DOW crashing, the screen was having a hard time keeping up with the numbers (DOW big board). It is not possible for the small guy to drop the DOW 1000 points. After 9/11, rules were put in place to halt trading when the market moved just a couple of percent. The uptick rule was also removed, for reasons that escape me. The big hedge funds wanted free range to move the market down dramatically. The market never goes up as fast as it goes down.

    The SEC must have been watching porn again on Thursday :-D .

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