Apple: Taking Some Chips Off the Table at Current Prices

Shares of Apple (AAPL) rose nearly $5 yesterday to close at more than $188 per share. The company is faring very well during an overall weak time for consumer spending, thanks to a strong product lineup, and Wall Street is excited over the prospects for the company's forthcoming next generation iPhone.

This overall bullishness is the polar opposite scenario we saw back in February when I wrote that Apple's Valuation Looks Attractive Again amidst worries over a consumer-led recession and a lapse of new product introductions from the company. Since then the stock has soared from $119 to $188, for a gain of 58%. As a result, the shares have gone from very compelling from a valuation standpoint (22x 2008 earnings estimates) to fairly valued in my eyes (34x 2008 earnings estimates) and accordingly, I have been taking some chips off the table at current prices.

Apple Stock Performance - 2008 Year to Date

This is not to say the fundamental outlook for Apple has changed (it hasn't), just that the stock no longer looks extremely undervalued as it did several months ago. The company remains a reasonable core technology holding in my view, just no longer in any significantly elevated portfolio weighting.

Full Disclosure: Long shares of Apple at the time of writing, just in less quantity than before.

Comments

[PopTheBubble]

Yeah, that's right, sell it all, chump. I wasn't able to buy enough at $120 and dream that it might go back down there in the next few weeks so I can load up. So help me out and dump this stock NOW! AAPL will be at $250 by September...they have product, not just a Web facade...that the world hungers for - just like oil, but it's really cool stuff and not controlled by crazy, two-bit thugs in lousy places.

[wallawallabingbang]

Sell baby sell. Sell before the WWDC in June. You'd be a blatant fool.

[vgmatic]

You are astute in your timing. When viewed technically on a 2, 5, or 10 year chart you will see a damaging double top forming. Additionally Apple has a supply issue on parts not a transition issue on product. It would be highly unlikely that a company would bleed its channel, then its web client enablement leaving 1-2 months of open season for its competitors. Once the customer buys the RIM or other 3G smartphone they will not be in the apple fold and that is a mistake from marketing and sales. You are astute in de-chipping!

[dig]

i think selling at this point is a mistake and you'll likely see a jump towards $210 going into june, then perhaps a pullback around earnings. however there are a number of catalysts which are all lined up for apple to exceed expectations going into the end of 2008 and 2009, and it will probably look cheap even at these levels.

[dig]

vgmatic, RIMM 3G ship date has not been announced. You won't be able to buy until late summer at earliest.

[User 163362]

For a great analysis on Apple trades and buying opportunities, check out

20smoney.com/2008/05/0.../

[Jon T]

vgmatic, I think it's pretty certain the iPhone will beat the Blackberry to 3g.

[CrossProfit]

Chad,

Smart investors know not to gamble and when to lock in profits. If you got in at around 120, then we agree with your overall investment style and locking in profits at around 188 on part of the position is prudent.

We also agree with 'dig', meaning that a likelihood of a spike between now and the end of June is fairly high. We put this at 211 and would lock in additional profits at that range, only to go back in on a retreat. If the retreat doesn't happen, then just say to yourself "never regret a profit".

See www.crossprofit.com/vi...
for chart and right click on chart for more options. EOL (end of line) was at 211 before February update and may be revised back again, depending on next earnings call.

CrossProfit

[DavidScubadiver]

I am certain that those who criticize a sale at any price would have been critical of people who chose to sell at $200. Its idiotic to criticize someone for selling a stock. Stocks are worthless, essentially, until they are sold. There is nothing wrong with taking a profit. Though there is nothing wrong with holding on to a winning stock either.

[montazuma525]

If you watch "Mad Money" with Jim Cramer, he too says to sell your Apple stock right before they bring out their new 3G iphone which may be introduced at the WWDC conference in San Francisco in early June. This conference "will showcase two revolutionary development platforms, the ground-breaking innovations of OS X Leopard® and OS X iPhone(TM), the world's most advanced mobile operating system." The stock has really shot up this year, but why would Cramer say to sell your Apple then. I would think that the demand for the new 3G iphone would be tremendous and the stock would go even higher. I apologize if this is a dumb comment, but I'm new to this and I need to increase my knowledge base.

[Pete D.]

NEVER, NEVER, NEVER listen to Cramer. He consistently advises action opposite to what he does with his own money. He'll pump Apple to short it, and then verbally dump on Apple to drive the price down and buy more. He's the one who said "Leave Your Money in Bear Stearns," days before the collapse. Cramer is an ass, and his followers are fools.

[Mac'em X]

I used to listen to Cramer, and took many, many of his recommendations. I'm poorer for almost all of them.

I research my own decisions now, and my portfolio's heavy on AAPL. Maybe soon there'll be a peak and temporary drop that skillful timing can profit from, but I'm in it for the long-term; I'm buying and holding this one while, long-term, it just goes up and up. (I'll prioritize great products and great management over "damaging double top" any day. : )

[AdamC]

Know more about cramer here www.deepcapture.com/

[optionsgirl]

I bought both puts and calls of aapl. Calls that expire in June. Puts for July. Aapl has short i-phone inventory. Think a new product is going to be unveiled in June?

[frs]

Short iPhone inventory? New 3G products? All this speculation over the phones is interesting, but ignores the fractional nature of that business line.

AAPL's big, BIG money and growth is coming from market share gains in the laptop & desktop business. Fundamentally, AAPL is a computer company with an accelerating, expaning business. That alone screams for long term buy. Phones and Pods are just icing on the cake.

[User 163362]

I love Apple long term, but still attempt to take advantage of short term trends... is it stupid to attempt to sell half my position if we hit $200 with the expectation that the stock will correct and then buy back in at a lower price?

[bryanz]

I took some off the table at $185... I might sell the rest June 6th just b/c the keynote always seems to be one of those buy the rumor, sell the news events.

[SequimRealEstate]

Adam C Thanks for the link to deepcapture.com fascinating and scary, very scary. I have had apple stock since the $20.00. It is the stock that will will be responsible for getting my daughter through college. I am going to take a 1/2 or so off the table at around the $200.00 dollar mark.

[SequimRealEstate]

1/4 or so off the table.

[optionfire]

WCDMA technology could take AAPL to a new height. Remember Qualcom in 1999 just by going CDMA and GSM technology ? So....people who want to pack up the profit by selling AAPL at this price is good BUT.... I would SELL "covered CALLS" + SELL "uncovered PUT option " to get premium on SAME strike price. It could happen only one or the other + you have time to repair it if it does not go in your favour ....meaning you can close the position with the premium received from both positions......good luck!

[pk de cville]

Oh Blah Dee Blah Dah,

You're right on the money. Apple is unassailably beastly. It's a carrier fleet, full speed ahead to the next conquest.

The others: In drydock, building destroyers.

Apple's fleet:

- dominant retail (both brick and mortar and website),

- world's best OS and SDKs unified in Macs/iPhones

- world's best user experience and service support

- dominant music store, soon to be dominant movie/TV store

- soon-to-be-dominant mobile app titles

- huge cash hoard (bigger than msft in % terms)

- world's best leadership/vision and technical/design brilliance

- world's best marketing insight

- exploding stk price leading to huge talent advantage: talent wants to work for Apple because of the increasing value of their options AND the disciplined way they are managed/led

- world's best innovation engine

Get the picture? Why would anyone distract themselves by trading this perma-growth stock? Timing a perma-growth is a fool's game, just let the good times roll!