Bullish Threads

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    Posted: 15 April 2011 07:29 PM

    Bullish Strands.

    Let’s look closely at some of the things we believe to be keeping the stock down:

    1. Japan disaster & supply chain. If the rumors are true, Apple is using it’s power and cash to virtually corner the market on critical components that go into the iPad? thereby by squeezing EVERYBODY else out. (i.e., Want to make a tablet that runs Android? Good luck finding a screen for it.)

    So how is this bad? Compressed margins for a quarter? Please. Look at the upside: everyone and their mother is planning on building a tablet. Components are hard to come by and then BAM! massive disaster strikes Japan and who’s at the helm of APPL? Perhaps one the greatest operations/supply chain guys in all the world. It’s almost too good to be true. And oh yeah, he’s got $60 billion cash. To worry about Apple’s supply chain with Tim Cook running the show is to be spitting into the wind.

    Leaving aside the massive human tragedy afflicting Japan, seems like if there really are constraint issues, it’s practically a plus for Apple. All their competitors are being hamstrung at the greatest moment of impact during a crucial time in the rush for tablet market share. iPad is going to make the iPod’s dominance seems like a children’s picnic and the Japanese disaster will quite possibly be part of that crushing success. (Sorry to be so cold-blooded about it)

    TC spoke of “first mover advantage”. Add that to the fact that no one else can even get off the dock in Japan and now you’ve got a “First Mover Plus” advantage.

    2. iPhone 5 “delay” (hilarious use of the word by the media for a product that hasn’t even so much as been announced). I specifically recall the July 4th weekend in 2007. The first iPhone went on sale. Can’t recall the exact release dates of iPhones since then, but it’s been about the same time every year: July 1? give or take a week or so.

    So, the iPhone usually comes out on or around July 1 and rumors are now predicting a September launch. WTF does this matter? Seriously, an approximate one-two month “delay” and the whole company falls apart? I don’t think so. Just doesn’t seem possible that a mere 6 weeks (again, give or take a week) is going to affect APPL’s numbers one single bit. The “delay” argument is stupid and fun for the media, but it isn’t going to impact APPL.

    I’m aware that from July to Sept is two full months, however I believe we’ll start benefiting from all the pre announcement hype in August. SJ is giving the keynote! It doubles as a hover craft! It comes with a dongle that allows you to print money, just like the Fed!

    3. Everyone and I mean EVERYONE is predicting “conservative guidance” on 4/20. One Wall Street truism that rarely fails is that if EVERYONE thinks something is going to happen, it doesn’t. This is doubly true of Apple.

    4. What are we always told? The market is forward looking. Let’s say 1-3 are completely true and that they have supply chain issues, component constraints, an iPhone “delay” AND they give ultra-conservative guidance. How in the world is this not priced in already?

    Isn’t this laying the groundwork for “positive surprises”? Can anyone even remember the last time WS was not all hyped-up about an APPL earnings report? Doesn’t it “always” sell off afterwards? Isn’t the opposite true this time? Isn’t the street bracing for a “sobering” report and/or guidance? Looks like a wall of worry to me. Love it.

    5. PE. No, not high school gym. Price to Earnings ratio. Doesn’t this matter anymore? On April 21, 2011 only two outcomes are possible for the price of this stock: Either there’s a positive run-up to keep the PE ‘round 18 or APPL, a company with 70% growth, is going to be slapped with a 15-16 PE. I know many of those WS guys aren’t exactly the brightest lights on the tree, but a 15 PE on a company with 70% growth? Some machine somewhere is going to have to overrule their stupidity and start placing buy orders.

    6. Steve Jobs is going to die! Yes, I know this already. Either the man returns and you have a MASSIVE positive surprise or he doesn’t. If he doesn’t, it’s priced the f*ck in. Or maybe the market isn’t as forward looking as its participants like to tell themselves? Right now smart money/big money is betting SJ never comes back. Say they’re right. How is this a negative surprise or any kind of surprise? It’s priced in. What’s NOT priced in is that in no time at all they’ll be calling TC the greatest CEO in all of corporate America. Positive surprise.

    7. Apple doesn’t care about it’s stock. Bullshit. There’s a not so famous quote from SJ being asked by an employee, “How come we don’t get bigger discounts and/or more free stuff?” SJ response, “My job is to make sure your stock goes up so that you can afford to buy those things yourself.”

    Apple will guide aggressively and defend their stock if it is in their interest to do so. They have in the past.

    8. The top 10 Apple analysts on the planet (as per PEDs smackdown/breakdown) are predicting a MONSTER quarter. They have the track record to back up their calls. Seems few care this time around because of guidance concerns on rumors that may or may not prove to be true. Remember when numbers mattered? It’s where the rubber meets the road. APPL is going to kill it on 4/20 and no one seems to care. Talk about losing the forest in the tress.

    9. DT’s piece on why APPL is set to pop.

    10. Everyone is giving up.

    [ Edited: 15 April 2011 07:37 PM by xian ]      
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    Posted: 15 April 2011 07:42 PM #1

    “What use are laws where money is king,
    Where poverty’s helpless and can’t win a thing?

    Even cynics who sneer are rarely averse
    To selling their scruples to fill up their purse.

    There’s no justice at law,
    It’s the bidding that counts.

    And the job of the judge
    Is to fix the amounts.”

    —A first century Roman

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

         
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    Posted: 15 April 2011 08:06 PM #2

    I agree only partially on point 6. It’s priced in to an extent, but to what extent? You seem to say that it’s fully priced in. Why should SJ not returning be priced in anyway? It’s a bad assumption. The only thing that’s priced in is that he’s on medical leave.

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    The only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. — Steve Jobs

         
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    Posted: 15 April 2011 08:28 PM #3

    Apple II+ - 15 April 2011 11:06 PM

    I agree only partially on point 6. It’s priced in to an extent, but to what extent? You seem to say that it’s fully priced in. Why should SJ not returning be priced in anyway? It’s a bad assumption. The only thing that’s priced in is that he’s on medical leave.

    I completely agree; and pardon the expression, for guys like you and me. Elsewhere I repeatedly hear that Wall Street thinks SJ will not return. So for “them” it’s either priced in or they’re not “forward looking”

         
  • Posted: 15 April 2011 08:46 PM #4

    xian - 15 April 2011 10:29 PM

    Bullish Strands.

    Let’s look closely at some of the things we believe to be keeping the stock down:

    1. Japan disaster & supply chain. If the rumors are true, Apple is using it’s power and cash to virtually corner the market on critical components that go into the iPad? thereby by squeezing EVERYBODY else out. (i.e., Want to make a tablet that runs Android? Good luck finding a screen for it.)

    So how is this bad? Compressed margins for a quarter? Please. Look at the upside: everyone and their mother is planning on building a tablet. Components are hard to come by and then BAM! massive disaster strikes Japan and who’s at the helm of APPL? Perhaps one the greatest operations/supply chain guys in all the world. It’s almost too good to be true. And oh yeah, he’s got $60 billion cash. To worry about Apple’s supply chain with Tim Cook running the show is to be spitting into the wind.

    Leaving aside the massive human tragedy afflicting Japan, seems like if there really are constraint issues, it’s practically a plus for Apple. All their competitors are being hamstrung at the greatest moment of impact during a crucial time in the rush for tablet market share. iPad is going to make the iPod’s dominance seems like a children’s picnic and the Japanese disaster will quite possibly be part of that crushing success. (Sorry to be so cold-blooded about it)

    TC spoke of “first mover advantage”. Add that to the fact that no one else can even get off the dock in Japan and now you’ve got a “First Mover Plus” advantage.

    2. iPhone 5 “delay” (hilarious use of the word by the media for a product that hasn’t even so much as been announced). I specifically recall the July 4th weekend in 2007. The first iPhone went on sale. Can’t recall the exact release dates of iPhones since then, but it’s been about the same time every year: July 1? give or take a week or so.

    So, the iPhone usually comes out on or around July 1 and rumors are now predicting a September launch. WTF does this matter? Seriously, an approximate one-two month “delay” and the whole company falls apart? I don’t think so. Just doesn’t seem possible that a mere 6 weeks (again, give or take a week) is going to affect APPL’s numbers one single bit. The “delay” argument is stupid and fun for the media, but it isn’t going to impact APPL.

    I’m aware that from July to Sept is two full months, however I believe we’ll start benefiting from all the pre announcement hype in August. SJ is giving the keynote! It doubles as a hover craft! It comes with a dongle that allows you to print money, just like the Fed!

    3. Everyone and I mean EVERYONE is predicting “conservative guidance” on 4/20. One Wall Street truism that rarely fails is that if EVERYONE thinks something is going to happen, it doesn’t. This is doubly true of Apple.

    4. What are we always told? The market is forward looking. Let’s say 1-3 are completely true and that they have supply chain issues, component constraints, an iPhone “delay” AND they give ultra-conservative guidance. How in the world is this not priced in already?

    Isn’t this laying the groundwork for “positive surprises”? Can anyone even remember the last time WS was not all hyped-up about an APPL earnings report? Doesn’t it “always” sell off afterwards? Isn’t the opposite true this time? Isn’t the street bracing for a “sobering” report and/or guidance? Looks like a wall of worry to me. Love it.

    5. PE. No, not high school gym. Price to Earnings ratio. Doesn’t this matter anymore? On April 21, 2011 only two outcomes are possible for the price of this stock: Either there’s a positive run-up to keep the PE ‘round 18 or APPL, a company with 70% growth, is going to be slapped with a 15-16 PE. I know many of those WS guys aren’t exactly the brightest lights on the tree, but a 15 PE on a company with 70% growth? Some machine somewhere is going to have to overrule their stupidity and start placing buy orders.

    6. Steve Jobs is going to die! Yes, I know this already. Either the man returns and you have a MASSIVE positive surprise or he doesn’t. If he doesn’t, it’s priced the f*ck in. Or maybe the market isn’t as forward looking as its participants like to tell themselves? Right now smart money/big money is betting SJ never comes back. Say they’re right. How is this a negative surprise or any kind of surprise? It’s priced in. What’s NOT priced in is that in no time at all they’ll be calling TC the greatest CEO in all of corporate America. Positive surprise.

    7. Apple doesn’t care about it’s stock. Bullshit. There’s a not so famous quote from SJ being asked by an employee, “How come we don’t get bigger discounts and/or more free stuff?” SJ response, “My job is to make sure your stock goes up so that you can afford to buy those things yourself.”

    Apple will guide aggressively and defend their stock if it is in their interest to do so. They have in the past.

    8. The top 10 Apple analysts on the planet (as per PEDs smackdown/breakdown) are predicting a MONSTER quarter. They have the track record to back up their calls. Seems few care this time around because of guidance concerns on rumors that may or may not prove to be true. Remember when numbers mattered? It’s where the rubber meets the road. APPL is going to kill it on 4/20 and no one seems to care. Talk about losing the forest in the tress.

    9. DT’s piece on why APPL is set to pop.

    10. Everyone is giving up.

    Kudos to you!!!

    I’ll add that The iPhone and the iPad together will make up ~2/3 of Apples sales and are combined, growing at over 100% YOY. The stock is substantially underpriced based just on these two businesses.

    The icing is that the iPad has caused a seismic shift in the technology landscape, benefiting Apple in a monumental way.

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

         
  • Posted: 15 April 2011 10:17 PM #5

    I agree that SJ cares about the stock price.  It’s been reported he’s against splitting the stock, but that’s not very definitive he doesn’t care. 

    I think we’ll hear something Wednesday—beyond earnings and guidance—that affirms Apple’s interest in growing PPS.  Perhaps SJ joins the call and adds some color about future products/strategy/initiatives.

    Good comments, except you missed one:  Pres. Obama is eyeing cooler electronics for the Oval Office—Apple is on his short list of favored hardware.

         
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    Posted: 16 April 2011 03:21 AM #6

    I’m not updating my forecast as a matter of principle, but information that has surfaced lately implies that Apple did far better than I expected and competitors will do far worse than almost everyone expects.

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    Read more at: Asymco Blog

         
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    Posted: 16 April 2011 04:26 AM #7

    A call to arms to unite the intelligent bulls.  Great job

    We will prevail.smile

         
  • Posted: 16 April 2011 05:20 PM #8

    omacvi - 16 April 2011 07:26 AM

    A call to arms to unite the intelligent bulls.  Great job

    We will prevail.smile

    Let’s hope that Apple’s earnings report/guidance deliver the slap aside WS’s head necessary to drive AAPL significantly upward.  I have my doubts this will happen, its not in the best interests of the big boys to drive AAPL upward for at least a year.  In the meantime they accumulate massive amounts of the equity from the unwashed.

    On a side note, I find this “news/rumor” quite interesting:
    http://www.pcmag.com/article2/0,2817,2383617,00.asp

    I’m forecasting 48 million units sold during calendar 2011.  That with other sources of income generates calendar EPS of $35.80.  Applying the average high ISM of the last 4 quarters (22.80) generates an AAPL value in April 2012 of $800+.

    For the purpose of investing I’m forecasting $710+ (ISM 20.00).  Can this be possible?  Depends on the market’s ability to comprehend whats happening.  But even with the current mind numbingly low ISM of 18.40 we get an AAPL value of $650+.

    In other words, we should expect AAPL to double, at minimum, in the next 12 months, even with ISM ‘compression’.

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    You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.

         
  • Posted: 16 April 2011 10:46 PM #9

    I would point out that Apple gave surprisingly strong guidance for FQ2 2011 at $4.90.  And Apple no doubt had good reason to—we will find out soon enough on Wednesday. 

    I think guidance for FQ3 2011 (June) will be something like $5.05ish, or north of there.

         
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    Posted: 16 April 2011 11:13 PM #10

    My guidance estimate for Q3 is from $ 4.50 to 5.10. 

    Q3 iPad sales up but gross margin and iPhone sales down.

    My calendar year iPad estimates are about 44 million.

         
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    Posted: 16 April 2011 11:18 PM #11

    Apple guided 4.8 for 1st quarter and they reported 6.43.  That is a 35% upside.  They were aggressive in their guidance for 2nd and I doubt they we not planning on beating by at least 30%.  They have been consistent in conservative guidance no matter how aggressive it has been.

    Not sure we can come up with 40 million iPads this year let alone 60 million.  But anything over 30 million is huge.

         
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    Posted: 16 April 2011 11:25 PM #12

    Tetrachloride - 17 April 2011 02:13 AM

    My guidance estimate for Q3 is from $ 4.50 to 5.10. 

    Q3 iPad sales up but gross margin and iPhone sales down.

    My calendar year iPad estimates are about 44 million.

    Isn’t WS looking for $5.26? Better come in ahead of that IMO.

         
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    Posted: 16 April 2011 11:31 PM #13

    omacvi - 17 April 2011 02:18 AM

    Apple guided 4.8 for 1st quarter and they reported 6.43.  That is a 35% upside.  They were aggressive in their guidance for 2nd and I doubt they we not planning on beating by at least 30%.  They have been consistent in conservative guidance no matter how aggressive it has been.

    Not sure we can come up with 40 million iPads this year let alone 60 million.  But anything over 30 million is huge.

    I have 9.8 million in Q3 and 16.7 million in Q4 to bring the total to 40 million in FY 11 - That’s to go with the 6.9 million we report on Wednesday…

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  • Posted: 16 April 2011 11:39 PM #14

    ChasMac77 - 17 April 2011 02:25 AM
    Tetrachloride - 17 April 2011 02:13 AM

    My guidance estimate for Q3 is from $ 4.50 to 5.10. 

    Q3 iPad sales up but gross margin and iPhone sales down.

    My calendar year iPad estimates are about 44 million.

    Isn’t WS looking for $5.26? Better come in ahead of that IMO.

    $5.26?  I don’t think Apple needs to guide that high.  They might, given the iPad 2, but Apple guided approx. 15 cents higher in Q3 2010 over Q2 2010 and wasn’t hurt during after hours. 

    Plus, I think Apple intentionally gave strong guidance at Q1 2011 earnings, so I’m not expecting much over $5.05- $5.10 this year for Q3 2011.

         
  • Posted: 16 April 2011 11:56 PM #15

    Interesting article - How to forecast a stock-market top

    URL:  http://www.marketwatch.com/story/how-to-forecast-a-stock-market-top-2011-04-15?pagenumber=1

    Conclusion:  Bullish