11 Reasons to Be Optimistic about AAPL

  • Posted: 21 June 2011 04:49 AM

    Folks:

    Been lurking for a while, but it feels like nerves are fraying here (mine perhaps included). I’ve read posts here for months, studied the archives a bit, and I have just a few observations that I draw some sense of optimism from:

    1. DT has offered up seemingly lofty price targets before that have elicited hemming and hawing. And (until this year) he’s been right. And I like the sound of $590. I also like the sound of Andy Zaky’s $500 target and current buy recommendation.

    2. There’s a neverending quest (I’m on it, too) to figure out what’s happening to the stock price and the PE compression, to search out catalysts, to bitch about the iPhone 5 delay that isn’t a delay, to fret about Steve Jobs’ health and its current effect on share price. There’s an answer out there about how all this factors into the price drop. And we’re not going to find it. Why? The answer lurks in the subterranean, Wall Street-controlled market that we don’t see. Think of it like this: It’s like trying to count oxygen molecules in the air with your bare eye. You know they’re there. But they’re impossible to see. Doesn’t mean it’s not worth trying, but I’m settling on just accepting it and moving on with my life. (Because the SEC isn’t going to do anything about it. I mean, seriously. If they didn’t regulate CDOs/credit default swaps, they’re not going to get around to AAPL options or price manipulation. The wimps.)

    3. Buying the dip is a good thing.

    4. Puts for this week and July are bottoming in open interest at 315/320. We’re entering a situation where not pushing the price up could screw more people than pushing it down.

    5. RIMM is literally dying before our eyes. So is Nokia. AAPL is swallowing them. This is a good thing, too.

    6. The drop has been produced from no bad news. We don’t have a real delay on a product because something is screwed up somewhere. AAPL didn’t miss estimates. We have phantom bad news. This is better than real bad news.

    7. Before SJ came out at WWDC, the words “I feel good” blared. Yes, the man is struggling with his health, and yes, there’s inherent risk in that. But if he was feeling terrible, would he really have gone to a Cupertino City Council meeting? (Best wishes to him.)

    8. Have you seen how AAPL advertises the iPad 2? As in, without some nerd making noise about “dual cores.” Yes, the iPad is magical. Yes, I want one without knowing why. Yes, on a daily/weekly basis some new massively attractive feature gets added. A month ago, it was being able to read the New Yorker. A week ago, it’s Facebook. These things weren’t already there? Nope. Makes me want to buy. And I’m not alone. Data point: “Mother of all backlogs.” Data point: 1-2 week wait, still.

    9. Halo effect. This brand is ridiculous right now. Everyone wants it. And really: Have you seen what iCloud is capable of? Does anyone here really not think that our computers/phones/iPods/iPads/TVs will not be streaming anything, anytime in millions/billions of homes in the next 3-5 years? AAPL doesn’t need to buy Netflix for streaming for the same reason they didn’t need to buy RIMM for its messaging. They can make it themselves.

    10. iPhone 5, running ios 5, is going to be badass, whenever it releases. And guess what: It’s going to be soon. I hate waiting to September, but the stock is going to explode when it happens. And you know what’s funny about that? We can see that from here and can invest and capitalize on it.

    11. What, $60B plus in cash on hand. Isn’t the mystery of what this company is going to do with it all worth tuning into every day? That cash pile is unfathomably monstrous. And growing.

    That’s all I got. Be nice to wake up green, too. (And if others would like to keep the list growing, please fire away.)

    [ Edited: 21 June 2011 04:53 AM by dolemite ]      
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    Posted: 21 June 2011 05:04 AM #1

    I would add to your topic title, “Within the Next 6 Months”, maybe.  And even that might be a little optimistic.

    Not to say we won’t see AAPL 400 by year-end.  I mean hey, by fiscal year-end we should have earnings of about $27 or so, if not higher. 

    But you have to keep your eye on certain parts of past history relating to Apple that actually _are_ pretty constant.  Apple’s habit of slipping into delays at times.  Apple’s issues with the iPhone 3GS and iPhone 4 initial launches.  Apple’s inability to meet supply and demand balance even with the benefit of a full quarter (in the US, iPad 2 still is quoted at shipping in 1-2 weeks, while the iPhone ships within 24 hours). 

    I wouldn’t bet on Apple having a “perfect” launch for iPhone 5, whether it be the pre-ordering or initial launch phases.  The crowds could be beyond epic.  A bunch of people won’t be able to get an iPhone on Day 1.  Servers will creak and break under the strain of record pre-orders and traffic.  There will be some activation server delays and problems.  iCloud may have some glitches.  Some people will whine and moan and magnify the true extent of the problem through the hysterical media and blogosphere echo chamber.  Apple will probably manage a launch number of 2.2 to 2.5-ish million vs. the 5 million everyone else is unrealistically expecting.

    Y’know, the same…stuff we saw in 2009 and 2010.  It’ll likely sort itself out in time, but I wouldn’t necessarily count on AAPL really taking off within a week or so of the iPhone 5 launch, unless it’s smoother than it’s ever been and results in monster initial sales numbers.  Assuming the iPhone 5 to be one of them “evolutionary” updates, you might not notice anyone getting particularly enthused right after its announcement unless you hear certain magic words like China Mobile.

    Signature

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

         
  • Posted: 21 June 2011 05:08 AM #2

    12.  A phone to address the HUUUGE prepay market.  TC alluded to it as strongly as I’ve ever heard from an Apple CxO.  It’s coming, and when it does you can bet your bottom dollar it will have been done right, that’s why they’re taking a year or more about it. 

    13.  The living room.  I give it 12 months until Apple finally breaks this category out of “hobby” status, again they’re taking their time and lining up their ducks.  iPad Airplay mirroring, Apple TV running iOS 5 and an Ax chip, it’s obvious to anyone looking.

    In summary the “next big thing” is already on the horizon, and the stock price doesn’t see it coming.

         
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    Posted: 21 June 2011 05:14 AM #3

    iPhone PAYG is a really exciting possibility.  Here’s hoping Apple’s PAYG gameplan kicks off this year.

    I’m still not so sure about the living room being a huge moneymaker for Apple, particularly with a $99 Apple TV.  But it’s an important value add to the ecosystem, and with an iPhone 5 or other A5-class device, I’d almost feel _compelled_ to get an Apple TV as a companion accessory, one I could also take with me very easily if I needed to.  Forget LAN parties!  It’s WLAN now!  And also, each Apple TV sold likely blocks off a bunch of other potential living room connectivity/companion devices, like, say, Google TV (not like it was a wild success to begin with(.

    Signature

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

         
  • Posted: 21 June 2011 05:18 AM #4

    100m iPhones annually
    +
    50m iPads annually
    x
    30% attach rate
    x
    AppleTV for $99
    =
    Another $2 or so EPS

    And that’s just FY12.

    “Oh, go on then given we’ve already done the hard work…”

    grin

         
  • Posted: 21 June 2011 08:04 AM #5

    14.  The size of the moat
    15.  The size of the castle

    Apple’s moat is comprised of its superior technology ecosystem, it’s preeminent brand, and it’s unparalleled manufacturing/marketing/retail business infrastructure.  Despite stiff competition on all fronts, I believe the moat has gotten wider in the past few years and is continuing to widen.

    Apple’s castle is the global markets for computers, personal electronics and media, all of them huge, and all of them (with the sole exception of mp3 players) Apple still has a small market share.  The castle also seems to be getting bigger each year as Apple extends it’s advantages to new markets.

         
  • Posted: 21 June 2011 09:13 AM #6

    $70B in cash now.

    $27 EPS by FYE Sept 2011 is almost in the bag.

         
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    Posted: 21 June 2011 04:36 PM #7

    Excellent thoughts.