What if You Could Buy Apple Pre-iPhone?

Before July, Apple (NASDAQ: AAPL) is going to release a creative new product that will drive innovation in other companies, create a huge new revenue stream and make people wake up to notice Apple for more than the iPod. Wait, it’s January 2008, not June 2007, and that great product referred to, was already launched. Everybody now has a second chance at buying stock in the company at a price point equal to the price before the actual release of the iPhone. People were paying $130’s for the stock before they even knew how successful and amazing the iPhone was going to become, not to mention the iTouch. So, here we are 7 months later and the company is valued close to the same. Well, not quite; on several valuation ratios it is now much cheaper than last year, as the profits anticipated are materializing. Take a look at the last 6 years of average PE ratios, keep in mind the iPod launch:

2002: 79.4
2003: 112.4
2004: 90.9
2005: 46.1
2006: 30.8
2007: 50.5
ttm: ~30

“Oh sell everything the game is over” is what the market did Tuesday afternoon when Oppenheimer gave extra conservative guidance with Apple’s normal tongue-in-cheek style predictions. Apple’s management likely guided conservatively (more so than usual) taking in the consideration of the economy, while investors priced it the same, a double margin of safety: two wrongs don’t make a right. What I can’t believe is how nobody, except those I deem visionaries, realize the magnitude of directions for growth. Everybody is so focused on how many iPods, but everybody has lost sight of how many directions they can go with a much more important ‘i’, innovation. Apple can do anything Microsoft (NASDAQ: MSFT), HP (NYSE: HPQ) , or Sony (NYSE: SNE) already does, except with a better user experience - and that’s what sells. Their balance sheet says they can do anything they want in terms of acquisitions too.

For fun, some of my personal predictions include: Apple enters the printer and camera space simultaneously with one new innovation, Apple enters the video game space and sells a portable version of the Wii, Apple takes on Logitech (NASDAQ: LOGI) and sells new gesture based input devices, Apple tales on the search giants & Facebook at the same time by completely innovating the revenue model, interface & functionality and linking it to the next iTouch. Of course more likely predictions include taking on RIM (NASDAQ: RIMM) in the corporate space of smart phones and it’s not too far fetched to see them releasing an even better/more powerful iPhone within 4 months. One of my favorite predictions comes from, Howard Lindzon, who is predicting the “Bank of Apple“. If anybody can make banking cool, it’s Apple.

Another reason investors should like Apple is the swings it gets in implied volatility. Writing covered calls (and hence applying our catch phrase, “covering the uncovered”) is a magnificent way to hold Apple for the long term. People are constantly willing to over pay for the option to buy Apple in the future because it’s a deal stock with constant media attention. Owning it before Macworld, one could have written February call options above $220 for a meaningful amount because of the ridiculous expectations the market had for Apple.

Disclosure: Author is accumulating Apple.

Comments

[gofer:]

hehe. How bout a new religion based on the Apple bible.... "Book of Jobs" ?

2008 Jan 24 03:07 PM

[gofer:]

hmmm... that might be an idea. We could all go to the "Church of Apple'. We could hear iMass, drink iWine, eat iBread, download a couple songs, hear iConfession and get that coveted iForgiveYou!
...sigh. I'll burn in iHell for this.

2008 Jan 24 03:55 PM

[Tom B:]

"We could all go to the "Church of Apple'."

Don't laugh. Look how big MSFT got without ever bothering to deliver even one decent product. Almost every Apple product I've ever owned has worked beyond expectations.

2008 Jan 24 04:07 PM

[sane_man:]

gofer, nice comment:-) I like it. I don't know where all these pumpers come from. In various shades and various ideas. I think these are school kids.
>>>>
Apple can do anything Microsoft (NASDAQ: MSFT), HP (NYSE: HPQ) , or Sony (NYSE: SNE) already does, except with a better user experience
>>>>>
Ha Ha! They can run the country and run the central bank as wel!!

2008 Jan 24 04:59 PM

[humble inve...:]

You left out possibly the biggest category killer of all, which has just begun to be speculated about elsewhere: the iTV. It's a flatscreen that has all the features of appleTV (and perhaps a satellite/cable receiver?) built in, so you don't need all the extra boxes and receivers. The internet and the t.v., finally married simply and elegantly by the company best able to do so. Offered in several sizes to fit a range of budgets. LCD panel technology is so advanced that it's becoming less and less distinguishable brand to brand, so it's the extra features that will make the difference. If Apple isn't working on this, they should be.

2008 Jan 24 07:17 PM

[TA:]

They should call this site 'Seeking Apple'

Everytime someone posts an AAPL article, a bunch of Apple brainwashed idiots either attack the guy if it's negative or praise him with lame comments like 'Apple produces the most amazing things that no one else can do'

Apple makes a ton of mistakes except everyone pretends they don't exist. Leopard was severely broken out of the gate, Air has NOTHING new (solid state drives have been available from Dell for a year), blocking people from adding apps to iPhone.

Welcome to the great double standard - all you people make me want to do it buy more Apple calls because they could easily double the price and you would pay it because Apple is so amazing.

I love taking money from fools.

2008 Jan 24 09:08 PM

[Mr. Billion...:]

Blah123 your comments here are heresy. May King Jobs have mercy on you!

2008 Jan 25 02:28 AM

[jmmx:]

iLOL

2008 Jan 25 03:18 AM

[SDBryan:]

FYI it's called the iPod Touch, not iTouch. iTouch sounds dirty.

2008 Jan 25 04:04 AM

[James Cullen:]

Blah123 is so right... I would know, I've criticized AAPL on the basis of valuation.

2008 Feb 01 10:15 AM