I Should Have Bought Apple Months Ago

OK, I have to make an admission. I've been rather complacent regarding Apple's (AAPL) prospects this year. I played a strangle option strategy prior to last quarter's earnings just breaking even in the end and didn't touch it this time around. The stock could have purchased in the 120s following the summer sell-off, but I've been thinking the stock's been overhyped. I've been wrong. Based on continuing impressive product cycles and innovation, I have to reverse my general lack of enthusiasm and endorse the stock as a long term hold.

One cannot ignore the continued strength of the U.S. consumer for these new releases, the Apple computer cool-factor, and continued waves of new, innovative products. Instead of toying with volatility and hoping for massive swings one way or the other, if I had simply gone long the day I bought my iPod mini, I'd have doubled my money multiple times over, or if going long in August, I could have been looking at a quick 50% gain.

Today, Apple released its 3rd quarter earnings. Net income rose to $904 million, or $1.01 a share, from $542 million, or 62 cents. Revenue climbed 29 percent to $6.22 billion in the 3rd quarter. Street estimates called for a profit of 85 cents on sales of $6.02 billion, according to Bloomberg.

This is one of Cramer's Four Horseman. I agree with about 50% of his calls (since his performance roughly matches the market, I can't endorse him any more than an average), but this is one where I've got to hand it to him.

Disclosure: No position in AAPL.

Comments

[jswede]

when did Cramer jump on board - $150? I see he was touting ISRG last night at $295... I went long at $112 early this year and had then missed the fall 06 run... thanks Cramer - how do you do it!?!?

[BMWTwisty]

Don't feel too bad. You're just like every stock "expert" who's been whining about Apple's way-too-high price and P/E ratio instead of just looking at what Apple's doing. Y'know that Halo effect that folks have loved to scoff at? Well yesterday proved you're looking at the manifestation. My son was the first kid in his middle school a while back to have an iPod. Now all of his friends have one and they're even getting iPhones. In high school. My daughter has an iBook in college. Next fall my son will have one when he goes. Look at the stats of Macs on campus. This is the halo effect and it'll be around for a while. I'll go out on a limb and speculate Apple will ultimately settle in at around 20% market share and a stock price of $350 in a few years. Whaddya think?

[Tom B]

Buy now. AAPL still has a mere 8% of the domestic computer market. I think the increasing credibility gap we see from Windows apologists will drive Mac sales higher. Vista and Leopard should both help Apple, if Leopard proves not to be disappointing. Leopard is 64-bit, which will help Apple break down the doors of more server rooms, an area they have been weak to date. The iPhones provide a monthly revenue stream, and sales will accelerate thru the holidays.

[theappeguy]

I've been a long time apple buyer since the imac with the neck. I was a stauch PC guy now I have 4 macs. I was always impressed by the stability of the operating system. Honestly, I had one desktop on for almost 3 years and shut it off twice only to move the computer. i could never say that about my PC. And when I tunes came on board, I knew it would be an instant success. Here's my prospects for the future..... and question... Is it a good buy now?
The facts regarding a buy are: new mac comming, stable and 64 bit operating system, iphone for the rest of the word - germany, france, of course the christmas season...
The facts regarding more of a hold or wait for a dip are: Massive run, Mostly split between an institutional stock and a big consumer stock (implying - impulse buyers and sellers)..

Based on the above - there still is more upside. I only which I kept my initial 1000 shares at $12 in the past, I would be looking at 400 K now, but forget the past.. This is a great stock which a visionary leader and innovator. Keep up the good work Steve..