Taking Some Profits in Apple

Shares of Apple (AAPL) rose nearly $5 today 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.

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

Comments

[Brandon]

Thank you for the honest opinion. This is probably the first time I have ever seen an SA blog that wasn't extremely positive on AAPL. If anyone has any comments on AAPL from a technical persective, they would be greatly appreciated.

[User 163362]

Thinking about reducing my position as well. All of my buys & sells of Apple are detailed here:

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

[wallawallabingbang]

Sell fools!

You will regret in about 3 weeks.

[longapple]

I still think this horse has pretty far to run. Huge potential in the desktop market when the economy picks up and consumer confidence returns. Vista will not attract new buyers. iPhone sales will just be icing on the cake, and there will be at least one totally new product announced in the next year. If you are a trader, go ahead and take some well earned profits. However, if you are an INVESTOR stay LONG on APPL.

[siliconvalleygambler]

Looking at the graph, it seems to me to be a nice cup and handle and a break from the tiny handle is starting. Technically I don't see a serious resistance till the old-time high. But I will take some positions off tomorrow if it pops. I want a good night sleep over the weekend.

[Oh Blah DeeBlah Dah]

Yeah, you probably took profits when AAPL was at 50, and at 80, and at 110, etc.

Apple may not be REALLY cheap at this time, however, if you think you can trade in and out, you will be with the 90% of investors that end up with mediocre returns.

AAPL has very little competition in its three businesses at this time. It is better to hold it until it is about to stop its high growth.

By the way, I appreciate your trading in and out of this stock. And, thanks for providing the liquidity in the shares for me. I have reaped handsome returns when AAPL drops off big time, and I scramble for cash to put into it.

I'll send you an email after I cash out in a few years and hit the beach in Rio.

[zoom]

Last Dec I had 2000 shares, then, well we all know what happened, and I bought another 1000 shares. With the new iphone coming, with all the outside apps coming for the iphone, with the ever expanding global iphone deals, with the ever expanding retail stores, with the percentage growth of mac, air mac, servers...that no one talks about, automotive deals with MB and Volkswagon, the possibility of becoming its own cell service provider, and lets not forget the itunes expansion, the HBO deal, the movie studio deals, what else? hmmm oh yes, there is rumor of a video console on the way that will hit the gaming market the same way the iphone hit the smart phone market.

I wonder about all the people that buy and sell Apple every other day, take a few $'s profit and give half to uncle sam, what's the point?

A prior comment touched on a potential sticking point when the stock gets close or at its Dec peak of $202, I think Apple has learned a few things about that and once it goes over $200 Apple will announce a split.

Can you imagine Apple suddenly at $100, that stock will jump $50-$75 in a heart beat. Long Long Long.... my 2 cents

[Brandon]

Oh Blah Dee Blah Da.......your comment is totally out of line. What do you want from pundits? Seriously....

You're the same person who will be crying that no one told you the risks when the value of your portfolio drops 50%.

[seeksome]

As long as there are pundits like this saying to take some money off the table that is a good bullish sign I still think AAPL has a good run left in it the momentum is still on our side.To buy your Apple stuff at below wholesale prices visit:seeksomething.com

[Oh Blah DeeBlah Dah]

RE: "... your comment is totally out of line ..."

My comment is perfectly IN-LINE.

Published investment studies have shown that NO ONE has been able to CONSISTENTLY time the market - no one. And no one has been able to CONSISTENTLY market time trading an individual stock over the long term. At some point, a big move up is missed or big move down crushes the performance.

An investment of 5% of one's portfolio into AAPL and held for the next few years will probably out-earn 99.99% of the market timers in AAPL stock.

I have friends that are 20-year INVESTMENT PROFESSIONALS that sold AAPL at 80, because they thought it was over-priced. They are still waiting for it to drop back.

[Brandon]

That's great Oh Blah Dee Blah Dah, but taking money off the table after a big run up in the price of a stock is a legitimate trading strategy. Making the assumption in your previous comment that he has repeatedly sold the stock at prices much lower than it trades at today, IS in fact, out of line. There's no basis for that comment other than your irrational anger over the blog.

The fact of the matter is, as a stock rises in price, and the multiple expands, the inherent risk in owning the stock also rises. This is a mathematical fact regardless of your opinion. Chad Brand should be commended for pointing that out and instead of chastising him, you should be more receptive to hearing all sides of an argument.

[vmai]

to: user 163362

you should analyze what you would have gained had you not sell apple, ever...

i bought apple when it was $9/share and never sold, ever. i still have the original 9 dollar shares now

[CrossProfit]

This is a repeat article.
See:
seekingalpha.com/artic...
from 05/13/2008!
There are 20+ comments on the previous identical Seeking Alpha article.

CrossProfit

[Oh Blah DeeBlah Dah]

RE: "There's no basis for that comment other than your irrational anger over the blog. "

There is NO anger on my part, and I believe that taking money off the table is a legitimate trading strategy. However, "taking money off the table" is more appropriate in a gambling situation, or when trading a high risk company that has very questionable potential.

A company like AAPL is revolutionizing industrieS (please note the plural). This is a very unique situation. Similar to what Microsoft was in its early years. Some professionals refused to buy MSFT in the 70s and 80s because it was too EXPENSIVE, its P/E was very high. Others traded MSFT back then and earned much less than what the buy-and-hold investors did. Those that realized the revolutionary change that MSFT brought about then, earned MILLIONS on only a few thousand dollars.

"... instead of chastising him, you should be more receptive to hearing all sides of an argument." In many situations, I believe TRADING a stock is the ONLY thing to do. However, AAPL is one that, I believe, trading will substantially decrease investor returns. THAT is not what I see in blogs. Unfortunately, almost all blogs I see about AAPL are: trade, trade, trade. THAT is what I am countering!

The average person does NOT have the time, the skill, the resources, nor the temperament to successful trade stocks!

[Sleuth]

If you are smart, sell your AAPL shares and enjoy the awesome returns! Sit back and watch the media blitz and price war between RIMM and AAPL for market share that will be starting early next month. RIMM has already announced a slew of new products to directly compete against i-Phone in the consumer arena. Also, don't forget Nokia...they will be introducing a slew of new products aimed at i-Phone. If you really believe that i-Phone is invincible then go ahead and buy AAPL shares aggressively! Just remember, RIMM and Nokia are formidable competitiors! It could be a bloody price war and you may get clobbered holding AAPL shares in your portfolio.

[fatcat]

I'll say it again,any aapl post brings 10x comments(all pretty good) but as I've said before ....volutility brings prfits for traders..

[TanToday]

>>>>Sit back and watch the media blitz and price war between RIMM and AAPL for market share that will be starting early next month. RIMM has already announced a slew of new products to directly compete against i-Phone in the consumer arena.<<

Note please, WHOM is trying desperately to counter WHOM here.

If the iPhone wasn't a killer product, a market changer, these long time absolutely dominent competitors would be laughing at them, as I believe, they were initially.

And ONLY now, one year later have the bells gone off, and FEAR is inducing a mad scramble to play catch up. And Apple is FAMOUS for version one being innovative, version TWO being breathtaking, and version THREE taking all the others chips off the table in a GRAND SLAM CHECKMATE move.

This is historically the pattern, and we are seeing that play out here once more. We saw it in desktops, MP3 players, online distribution of music, then laptops, in ultraportables, and in the granddaddy of them all the OX operating system.

And don't forget the retail stores.

When EVERYONE was bailing on those, Apple announced it's entry, to the guffaws of EVERYONE, they predicted a swift, sure, and complete demise.

Now we have over 200 stores, GROSSING $4,600/sf/yr, which is TRIPLE the next nearest class of competiors, and DOUBLE the very best retail store in sales per foot, in ANY category.

Don't think they are slowing down, if anything they are going now for dominence in all categories, AND at the same time, creating new ones that don't even exist.

[jmmx]

Am I missing something here?? I see closing price of $189.73 (I guess this IS over 188) and a rise of $3.47 which most rational people would NOT say is "almost $5" If the author's facts are this far off it is hard to take him credibly.
====

[aapladay]

Ive thought of taking some profits. With Steve Jobs leading the company though, I really don't see Apple slowing down for awhile the innovators they are! There will be no price war between RIM and Apple, their products are high end top of the line where price wars don't happen. It will be an innovation war, one that Apple is fighting on many fronts against many companies and kicking butt! They are moving into new territory, taking it over, and pushing the line further. I hope that this company keeps doing well not just for my portfolio, but for our way of life.

[wallawallabingbang]

RIM is breathing hard and sweating profusely in the effort to emulate Apple.

70+ P/E
$400.00 split-adjusted stock price

Not for long!

[CrossProfit]

jmmx,

See our first comment on this article, about five comments before yours - explains all.

[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!

[User 163362]

Guess Apple's closing price on June 6th and you'll win an iPod.

20smoney.com/2008/05/1.../

it's free and only takes a second... check it out.

[Brewer]

This is a repeat article, and it's gone up since it was last ran...

[John Egan]

Dear "Oh Blah Dee Blah Dah" ..

Sung to the tune of "Ob-La-Di" (Beatles)

(intro - drum roll)

He put him money in de Apple Tree..
He think he goin' to d bank

He say he want to be a retiree
But then his Apple stock do tank..

Oh Blah Dee
Blah De Blah
Oh Yeah!
Oh Blah Dee Blah Dah...

Sorry.. Couldn't help myself.. ;-)