AAPL Bears Beware

  • Posted: 08 May 2010 10:54 PM

    AAPL Bears Beware. Hunting season is now open.

    An excerpt from my latest posting at Eventide:

    The recent sell off in AAPL only makes the share more attractive relative to the company’s current rates of growth and continuing growth potential.

    It’s not so much about device sales as margin created from post-purchase monetization.

    [ Edited: 08 May 2010 11:04 PM by DawnTreader ]      
  • Posted: 08 May 2010 11:44 PM #1

    artman1033 - 09 May 2010 02:34 AM

    It really does not matter how EUPHORIC your projections are DT.

    Difference of opinion. I consider my projections far from euphoric. I consider the projections moderate to modest. There’s no disputing 63% earnings per share growth in six months and an even faster pace of revenue and earnings growth this quarter.

    The bears might be out of the woods feeding for now on the illusion of weakness, but the meal isn’t filling and they will have to move on to find real game.

         
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    Posted: 08 May 2010 11:52 PM #2

    The trends are compelling and as close to “truth” as it gets in this unpredictable world.

    Unless the economy goes into a funk a good deal worse than the Great Recession?, Apple’s fortunes and financial performance will continue to soar.  Even if Apple released a new iPhone and nothing else, it’d still do very well this year.

    Eventually, when the global economy and/or investor sentiment stabilizes (which it has to at some point), what I think is the world’s greatest company will end up with a valuation consistent with its earnings and growth potential.

    If you’re a long-term investor you should feel pretty good about AAPL, subject to the usual risk of the universe of not-so-great things that can happen to anyone, any company, any time.  If you’re short-term, then the crystal ball remains hazy.  It’s pretty simple.

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

         
  • Posted: 08 May 2010 11:53 PM #3

    artman1033 - 09 May 2010 02:49 AM

    BUT, AAPL fluctuates with the economy.

    Actually, with such a high beta, AAPL’s share price movements will amplify (up or down) the overall market’s performance during micro-cycyles.

         
  • Posted: 09 May 2010 01:34 AM #4

    Dylan Ratigan on the Crash. Essentially the High Frequency Traders shut down. Esentially we don’t have a real market system anymore.

    http://www.msnbc.msn.com/id/21134540/vp/37026025#37026025

         
  • Posted: 09 May 2010 05:29 AM #5

    artman1033 - 09 May 2010 02:34 AM

    It really does not matter how EUPHORIC your projections are DT.

    54 MILLION shares traded DOWN Friday.

    Thursday WAS a Black Swan event the could occur AGAIN at any moment. It is the nature of HFT.

    If Greece WAS last week, when will CALIFORNIA be the problem?

    California is the 8th biggest economy, MUCH bigger than Greece.

    APPLE is a wonderful company. I am just worried about AAPL short term.

    Hi, I’m new to the stock market.  I took a finance class last summer and started a Roth Ira at about the same time.  Iwas quickly drawn to aapl for it’s combination of growth and value characteristics.  I found this board because of the coverage of deagols earnings forecast and now follow regularly.  I like most people was blown awAy by Thursdays events.  I also tend to share the bullish views of apple as others here.  As someone new to the markets, January was a rude awakening to how subject individual investments are to macro events.

    That being said, I have been surprised to see little discussion of the jobs report from friday and it’s implications.  For the past several months, the markets have seemed to me to be a battle between earnings (mostly really good) and macro events (poor news from bank foreclosures, Europe, unemployment before Friday, housing, etc).  Perusal of finance related news frequently turns up discussion of a jobless recovery; however, I disagree that this will be the case.  I get the impression that companies have laid off people down to the bone and been able to achieve amazing increases in productivity.  This can only go so far.  Given the fact that earnings have been so good for several quarters in a row, companies have plenty of capital to use to put to use towards growth. Omce cost cutting has yielded all it possibly can, investments in new ventures must surely follow if growth is to be achieved.  As such, i have been expecting that at some point employment numbers will rapidly improve.  My hope is that the numbers reported on Friday represent an inflection point regarding the trajectory of unemployment and may start to support the fairly high equity prices recently seen. 

    (please forgive any typographical errors.  I’m still getting used to typing on an iPad smile. )

         
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    Posted: 09 May 2010 11:06 AM #6

    The jobs market will improve somewhat because “small” and family business realizes that they must pull themselves up.

    Meanwhile, people keep working, eating. 

    ==== 

    Regarding the high volume high frequency traders.  I’m glad to see any reduction of day trading and short-term swings (yes, I’ve done it myself).    Right now, there are few mechanisms to reign in such activity.

         
  • Posted: 09 May 2010 11:47 AM #7

    RedUte83, employment is usually a lagging economic indicator. Layoffs follow the start of an economic downturn and peak unemployment often occurs as the economy has begun to recover. Because it’s a lagging indicator it doesn’t get quite the same mention on a finance-related board.

    The stock market, as a leading economic indicator, tends to respond ahead of changes in the economy. The jobs report impacts the market because it corroborates or contrasts the market’s read on the overall economy. Second, as jobs are added it will positively impact future consumer spending.

    So don’t be surprised if the market doesn’t weigh heavily the jobs report. Employment and the stock market are different indicators - one a leading indicator and the other a lagging economic indicator.

    In terms of productivity, technology is a component of worker productivity and technology spending can rebound before employment rebounds. Technology spending will impact Apple more quickly and more directly than gains in overall employment. Remember, the market is earnings driven so reductions or gains in employment are less of a factor in stock market movements than earnings with the biggest impact in the market coming from an anticipated increase in consumer spending months after employment begins to rebound. Productivity tends to rise ahead of employment.

    One area where Apple is directly impacted by the economy is education spending. But schools develop budgets well in advance of economic reports so increases in employment and the resulting increases in state education revenue from increased income tax and/or state sales tax receipts won’t be realized until budget appropriations and authorizations occur at a later date.

    Please also remember Apple derives well over 50% of it s revenue and revenue growth from outside the US so economic issues that are US specific or in magnitude particular to the US have less of an impact on Apple than many might consider.

         
  • Posted: 09 May 2010 12:15 PM #8

    The difference between 2008 and now is dramatic.

    On a macro level, there is less leverage in the system, interbank credit spreads are normal and economies are recovering and growing as opposed to the collapsing economies and credit freeze that existed in 2008.

    On a micro level, Apple was deferring Iphone revenues. This created a double whammy as Iphone sales were cannibalizing ipod revenues. The problem was that declining Ipod revenues were recognized 100%, but the replacement I phone revenues were only recognized at a 12% rate (deferred over two years). This confused and masked Apple’s actual performance during a crisis.

    Today, Apple’s revenues are mostly based on a cash basis. Apple’s business is booming for all to see and the stock valuation is retardedly low.

    This time is different. (Boy, do I hate to say that.)

    artman1033 - 09 May 2010 02:49 AM

    Remember, Apple was doing FANTASTIC in January, 2008.

    Almost every quarter is a RECORD quarter for Apple.

    BUT, AAPL fluctuates with the economy.

    Signature

    Inflation robs from the past, deflation robs from the future. Pick your poison.

         
  • Posted: 09 May 2010 06:28 PM #9

    jeffi - 09 May 2010 03:15 PM

    On a micro level, Apple was deferring Iphone revenues. This created a double whammy as Iphone sales were cannibalizing ipod revenues. The problem was that declining Ipod revenues were recognized 100%, but the replacement I phone revenues were only recognized at a 12% rate (deferred over two years). This confused and masked Apple’s actual performance during a crisis.

    Today, Apple’s revenues are mostly based on a cash basis. Apple’s business is booming for all to see and the stock valuation is retardedly low.

    This time is different. (Boy, do I hate to say that.)

    A few issues to note: While the deferred revenue accounting for the iPhone was misunderstood, the iPod touch at higher ASPs supported iPod revenue despite a drop in unit sales. The iPod line has matured not due so much to iPhone sales but a transition to smartphones in general and changing consumer desires. The market for digital devices is dynamic.

    During the recession the rates of Mac unit sales growth slowed dramatically following strong growth in the aftermath of the Intel transition. In all Apple fared much better than the overall economy. Further, Apple is valued as a hardware maker by the markets and suffered undervaluation as PC sales in aggregate declined.

         
  • Posted: 10 May 2010 01:39 AM #10

    RedUte83 - 09 May 2010 08:29 AM

    [...]

    That being said, I have been surprised to see little discussion of the jobs report from friday and it’s implications.  For the past several months, the markets have seemed to me to be a battle between earnings (mostly really good) and macro events (poor news from bank foreclosures, Europe, unemployment before Friday, housing, etc).  Perusal of finance related news frequently turns up discussion of a jobless recovery; however, I disagree that this will be the case.  I get the impression that companies have laid off people down to the bone and been able to achieve amazing increases in productivity.  This can only go so far.  Given the fact that earnings have been so good for several quarters in a row, companies have plenty of capital to use to put to use towards growth. Omce cost cutting has yielded all it possibly can, investments in new ventures must surely follow if growth is to be achieved.  As such, i have been expecting that at some point employment numbers will rapidly improve.  My hope is that the numbers reported on Friday represent an inflection point regarding the trajectory of unemployment and may start to support the fairly high equity prices recently seen. 

    [...]

    Welcome.

    To supplement the headline jobs numbers of 290,000 jobs created and .2% increase in the unemployment rate:

    1) “Jobs numbers” are determined and published by the government.  They get little else right; these numbers may not be right either.  Just by way of example, many economists estimate that the real unemployment rate is more like 15%.

    2) 60,000 of the jobs in this report were for temporary census workers.

    3) 40% of the jobs were for government positions; few if any of these are productive.

    4) More layoffs loom, including in state and local government.

    5) Historically, small companies create two-thirds of new jobs; small companies are facing increasing taxes starting now and accelerating on January 1st.

    6) A double dip in housing loom is a real possibility.  I expect it; others disagree.

    7) As the figures in this report imply, the economy must produce more than a quarter million new jobs just to break even.  It will take a rate of 500,000 new jobs to make significant improvement in the unemployment situation.

    8) The Fed balance sheet is huge.  To prevent rampant inflation the Fed must trim it.  When they do so, it will almost surely have a negative effect on job creation.

    9) Cap and Trade, if enacted, is a job killer.

    10) The so-called Greece problem is real.  To the extent that Ireland, Spain, Portugal, and maybe Italy follow, the “bailouts” could hurt the economy in Europe.  Lots of U.S jobs are related to trade with Europe, including even our own favorite fruit company.


    So, last Friday’s report of job creation was better than a report of job destruction, but in and of itself, it is nothing to get too sanguine about.

         
  • Posted: 10 May 2010 01:42 AM #11

    DawnTreader - 09 May 2010 01:54 AM

    AAPL Bears Beware. Hunting season is now open.

    An excerpt from my latest posting at Eventide:

    The recent sell off in AAPL only makes the share more attractive relative to the company’s current rates of growth and continuing growth potential.

    It’s not so much about device sales as margin created from post-purchase monetization.

    Just bringing the article link reference back to the top or bottom or whatever.  LOL

         
  • Posted: 10 May 2010 12:28 PM #12

    The bears have scampered back into the woods…

         
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    Posted: 10 May 2010 12:41 PM #13

    DawnTreader - 10 May 2010 03:28 PM

    The bears have scampered back into the woods…

    I believe I just saw a few of them hanging out together this morning…

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    “Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition

         
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    Posted: 10 May 2010 01:04 PM #14

    Alright now. I’m a long and a bull myself, and thrilled to see AAPL back up 7.5% (and looking for more), but let’s maintain some level of decorum. This board has bears, and their feedback is valued, even if we disagree with it.

         
  • Posted: 10 May 2010 01:16 PM #15

    Roman - 10 May 2010 04:04 PM

    Alright now. I’m a long and a bull myself, and thrilled to see AAPL back up 7.5% (and looking for more), but let’s maintain some level of decorum. This board has bears, and their feedback is valued, even if we disagree with it.

    I’m a big fan of eco-diversity and bears are an important part of the system. We welcome all. I’m cautioning the bears not to feed themselves on Apple FUD. It isn’t filling and there are more nutritious things to eat. For example, have you seen how tasty Dell looks right now as a bear meal? How about AMZN?

    I do suggest we feed the bears but the food should be substantial and nutritious.