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I have a Master of Public Affairs degree (Political Economics with a Major in Management) from the University of Texas at Dallas (UTD). I love to write but am more logical and mathematical in my thinking. It brings to mind something that my 6th grade teacher posted on the wall by my desk - a... More
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  • Apple Shocks The World Leaving Analysts Stunned

    Apple (NASDAQ:AAPL) shocked everyone on Monday. Not only did the company make the new "plastic" iPhone 5C an expensive high margin magnet (against analysts' advice), they unexpectedly sold millions of them. And the more expensive 5S blew out of stores with the most popular gold model back-ordered until November according to ATT (NYSE:T). As one analyst noted this may be because the pale gold color looks completely different than last year's iPhone 5. You know right away that it is a new 5S because of the color. And gold is considered a symbol of wealth in many countries including China. The company sold a record breaking 9 million new phones this week-end, which far exceeds any new iPhone launch in history by more than 80%. This sent shares to a high of $496 on Monday:(click to enlarge)

    CUPERTINO, Calif.--(BUSINESS WIRE)-- Apple® today announced it has sold a record-breaking nine million new iPhone® 5s and iPhone 5c models, just three days after the launch of the new iPhones on September 20. In addition, more than 200 million iOS devices are now running the completely redesigned iOS 7, making it the fastest software upgrade in history. Both iPhone 5s and iPhone 5c are available in the US, Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore and the UK. Demand for iPhone 5s has exceeded the initial supply, and many online orders are scheduled to be shipped in the coming weeks.

    This Apple run on Monday is only the beginning, as analysts scurry to adjust revenue and gross margin numbers significantly higher. The sales results appear to be just as big of a surprise to Apple because it filed a statement with the SEC on Monday changing its guidance:

    On September 23, 2013, Apple Inc. (the "Company") announced that it has sold over nine million new iPhone 5s and iPhone 5c models, just three days after the launch of the new iPhones on September 20. Apple expects total company revenue for the fourth fiscal quarter to be near the high end of the previously provided range of $34 billion to $37 billion, and expects gross margin to be near the high end of the previously provided range of 36% to 37%.

    This filing leads me to believe that the numbers for the quarter will be even higher than those listed above. Consider that the first 3 days of sales were almost double any other iPhone release in the past. And those sales would have been much higher if the inventory had been available. The high estimate for revenue was $38 billion before the iPhone sales were released. These first sales alone will generate an unexpected $2 billion in revenue for the company. If this selling rate continues, the next quarter which includes the holidays will be dramatically higher.

    Revenue EstCurrent Qtr.
    Sep 13
    Next Qtr.
    Dec 13
    Current Year
    Sep 13
    Next Year
    Sep 14
    Avg. Estimate36.10B54.88B169.58B180.67B
    No. of Analysts44375150
    Low Estimate34.50B49.37B168.00B166.94B
    High Estimate38.13B58.80B171.56B198.00B
    Year Ago Sales35.97B54.51B156.51B169.58B
    Sales Growth (year/est)0.40%0.70%8.40%6.50%

    iTunes Radio

    Buried among all of the iPhone news is the fact that 200 million current users downloaded iOS7 on older iDevices which will catapult the free iTunes Radio to the top of the streaming radio "heap". This sent Pandora Radio (NYSE:P) stock into a downward spin on Monday. Shares dipped 10% as the stock went below $24. This is because the Apple radio service appeals to the trendy "gotta have it first" crowd with access to millions of old, new and exclusively pre-released hit songs:

    As the world's most popular music store, iTunes has access to thousands of new songs every week. And you'll hear some of that music on iTunes Radio before you hear it anywhere else. Whether it's an exclusive track from an up-and-coming band or a pre-release of the next big hit....

    (click to enlarge)There is no doubt that a free radio service of this caliber will be very popular, and take a huge bite out of Pandora's listening base. Not only is it more convenient, but iTunes Radio has access to over 27 million songs, versus Pandora which has a library of only one million tunes. The Apple service is already starting out with 200 million potential listeners. And according to the company (link above), over 11 million people have already tuned in to iTunes Radio since launch. Eleven million listeners in just 4 days. If only half of the 200 million new iOS7 users tune into the free radio, it will have 100 million listeners. And 200 million is not a finite number. That is only the amount of users that downloaded iOS7 in the last four days. That number will continue to grow. Consider that there are currently over 575 million active iTunes accounts.

    Chart forApple Inc.

    After the Apple iPhone event a few weeks ago, many analysts thought that the new phones were too pricey for the minimal changes on the devices. And the shares collapsed. However, what they missed was the fact that the biggest change was to the hardware. Consumers loved the new colors. A sexy looking new product can change everything for a company, and this is a perfect example of that. As I remarked in an article earlier this month:

    The new phones that came out today are going to sell like little hot cakes. And due to the changes in design, I do not see any production problems ahead. Barring any unforeseen macro problems, these iPhones should lift Apple back up to great new heights again. If you are anxious to buy the stock, do it. Buy this little dip. But if you are still not sure, wait a couple of weeks for the kinks to fall out. The only problem is that if there aren't any kinks, the price may have gone sky high when the first sales are announced.

    Problems

    The 5S does have a few kinks. There are claims that the fingerprint scanner has already been fooled by the picture of a fingerprint on someone else's finger. But what about your own print? What if you go to a bar and get so drunk that you pass out, and a crook uses your own finger to access the phone settings and add their prints for certification. My advice is that these things are going to happen, so just be careful who you drink and sleep with. But this finger scanner is still a big deterrent to the typical grab and run theft. The bigger problem, in my opinion will be if the scanner doesn't work for the owner of the phone. So far this does not appear to be a problem.

    The other major problem reported is that millions of people did not get the glamorous gold 5S that they wanted and stood in line for. This made it quadruple in value on eBay. I found several selling for over $2,000 each online.

    There will probably be more dips in the stock market due to the "gloom and doom" in Washington as the government threatens to "shut down" next week. But long term investors interested in Apple should consider any dips as buying opportunities. Because Apple has now moved out of speculation mode in my opinion.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: P, AAPL, long-ideas
    Sep 24 7:15 AM | Link | 1 Comment
  • Has The Fiscal Cliff Been Averted?

    With a major breakthrough in fiscal cliff talks overnight. Both sides have made "significant concessions" for the first time:

    The differences over how to resolve the "fiscal cliff" narrowed significantly on Monday night when the White House proposed leaving lower tax rates in place for everyone earning under $400,000.

    That was a change of position for President Barack Obama who has been pushing for a $250,000 threshold although it is still far from Republican House of Representatives Speaker John Boehner's preference of $1 million.

    "Overnight news on the fiscal cliff has been taken positively by the markets here in Europe after underperforming the U.S. recently," Securequity sales trader Jawaid Afsar said.

    But others point out, that even if Obama and Boehner come to an agreement, they will have to "sell it" to their respective parties. This, like any other bill would have to be approved by the House and Senate when it is finalized. Some of the things coming out of this escapade show just how narrow minded some of these people in Washington are. Some of the Republicans are refusing to agree to anything that will raise taxes, however if they don't agree and we go over the cliff, taxes will go up for every single working person in the country, which they admit will make the economy worse:

    "I won't support a deal that raises taxes because it makes the economy worse," Steve Scalise (R., La.), chairman of the Republican Study Committee, made up of conservative House Republicans, "But I have yet to see any formal plan."

    Many Democrats oppose the Social Security idea Mr. Obama has agreed to include. "The Republican plan to cut the Social Security benefits of millions of seniors in order to protect tax breaks for the richest 2% in America is neither fair nor balanced,'' said California Rep. Xavier Becerra, a member of the House Democratic leadership.

    And to take money from millions of low income seniors to protect the rich will not bode well with anyone, except maybe some of the very most greedy. It reminds me of the old saying "Pigs get fat, and Hogs get slaughtered". Hopefully public pressure will shed some light on some of these idiotic ideas that are causing a roadblock to prosperity for this country. Because we are getting dangerously close to the edge of the cliff now. As a side note, I will admit that I am a moderate Republican, but not to a fault.

    These new fiscal talks have the entire market breathing a whiff of fresh air, and (as noted above), it was a positive impact on foreign markets overnight.

    Dec 18 1:51 PM | Link | 1 Comment
  • Sirius XM Will Add 4th Quarter Subs Due To Mega Storm's Impact

    The entire world is watching as Hurricane Sandy bears down on the Eastern Coast of the United States. Financial Institutions are scrambling to reschedule almost everything. Originally the U.S stock market was scheduled to be closed Monday with the exception of electronic trading. However that was changed late Sunday night due to the extreme danger the storm poses to millions of people. Now all major U.S. stock and option exchanges will be closed Monday and Tuesday due to the storm. They will re-open Wednesday weather permitting. Many companies have now rescheduled their earnings announcements for later in the week. This includes Sirius XM (NASDAQ:SIRI) which was originally slated to report on Tuesday:

    NEW YORK, Oct. 29, 2012 /PRNewswire/ -- Sirius XM Radio today announced that it plans to release third quarter 2012 financial and operating results on Thursday, November 1, 2012. SiriusXM will hold a conference call at 8:00 am ET on Thursday, November 1, 2012 to discuss these results.Chart forSIRIUS XM Radio Inc. (<a href='http://seekingalpha.com/symbol/siri' title='Sirius XM Holdings Inc.'>SIRI</a>)

    This was a very prudent decision due to the fact that millions of investors will be without electricity for quite some time. And because of this, trading stocks will be put on the back burner as East Coast residents concentrate on survival. Just trying to stay warm, and find food and water without power will be first and foremost on everyone's minds. CNN is reporting that many major cities will be without power for weeks, and an estimated 60 million people may be affected:

    Forecasters said Sandy was likely to collide with a cold front and spawn a "superstorm" that could generate flash floods, snowstorms and massive power outages from North Carolina to Maine.

    The National Grid, which provides power to millions of customers, said 60 million people could be affected.

    "It could be bad," said U.S. Coast Guard Rear Adm. Steven Rattior, "or it could be devastation."

    Ironically, for those who have a subscription to Sirius XM radio, they will be able to get information about the storm that their neighbors don't have with regular radio. When phone, power and internet are wiped out, satellite radios reign supreme. Because the satellites cover the entire country, residents in the middle of the storm can listen to where the storm is, along with the latest news on major road and tunnel closures, storm surge, etc. And friends and relatives around the country can also listen in. Right now Sirius XM is providing continuous coverage of the storm in all of the affected states:

    The Weather Channel will air nonstop on Sirius channel 184 and XM channel 1 throughout the course of the storm, offering millions of listeners across the country in-depth, expert coverage including evacuation and safety tips, an explanation of the winds and pressure of the storm, its projected path and landfall expectations, tips on how to deal with severe storms and flooding and more.

    Advisories with extended coverage and local updates from The Weather Channel are airing hourly on SiriusXM's First Traffic and Weather, channels 132 to 140.

    In addition, SiriusXM's Road Dog Trucking Radio (channel 106) will keep the nation's truckers updated with information on highway closures and weather.

    Due to the massive size and severity of this storm which is projected to dramatically affect at least eight states it has been dubbed Frankenstorm. It may be the biggest storm to ever hit the United States. Because residents could be without any way to communicate with the outside world for days or weeks, I expect Sirius Subs to jump dramatically. These new subs will make Q4 hit new record highs. Even though it may be too late for some people to get the service during this storm, the effect of being homebound for days without any information about what is going on will be a motivation to get the satellite service in the future.

    (click to enlarge)

    Subscriptions make up 87% of the revenue at Sirius, and most of the listeners that want the service for this type of emergency will also buy a battery operated portable satellite radio. So each new sub that is added because of this type of emergency will equate to $400 in additional unexpected revenue for the year.

    Sirius will make money, while many companies suffer dramatically from this storm. Estimates range from $2 to $100 billion. One analyst thinks it will cost around $10 billion per day:

    Ryan Sweet, a senior economist at Moody's Analytics, says Sandy would be a costly storm but one that would have little impact on fourth quarter gross domestic product.

    "It's much more a regional story…[Sandy] will not have significant U.S. macro economic implications," he says in a phone interview. Sweet estimates the lost economic output between Washington, D.C. and New York City would equal at least $10 billion a day.

    The fourth quarter is already projected to be huge for Sirius, with projected earnings to hit 3 cents per share. And revenue is projected to be a mind boggling $893 million for Q4 with a high target of $908 million. This storm should push that revenue even higher with the new subs added:

    Earnings EstCurrent Qtr.
    Sep 12
    Next Qtr.
    Dec 12
    Current Year
    Dec 12
    Next Year
    Dec 13
    Avg. Estimate0.020.030.550.10
    No. of Analysts13.0013.0010.0013.00
    Low Estimate0.010.020.530.06
    High Estimate0.030.040.570.13
    Year Ago EPS0.020.010.070.55
     
     
    Revenue EstCurrent Qtr.
    Sep 12
    Next Qtr.
    Dec 12
    Current Year
    Dec 12
    Next Year
    Dec 13
    Avg. Estimate865.62M893.05M3.41B3.81B
    No. of Analysts12121515
    Low Estimate858.05M884.87M3.39B3.70B
    High Estimate875.00M908.00M3.43B3.96B
    Year Ago Sales762.55M783.74M3.01B3.41B
    Sales Growth (year/est)13.50%13.90%13.00%11.90%

    Chatter on the financial sites had already been predicting very low trading this week in anticipation of the Presidential election next week. Due to the diverse opinions of the two candidates regarding the economy and tax laws, the market will take a different turn depending who the winner is. And there is a lot riding on who the Congressional winners are. Chart forSIRIUS XM Radio Inc.

    Whenever there is a major disaster, a lot of investors will sell. So now we have the low volume from people who will be unable to communicate with the outside world, combined with the uncertainty of the election, and a huge national disaster. As most seasoned investors know, this is a good time to take advantage of lower prices caused by this type of uncertainty. Because the market will recover. This is a good time to take advantage of these upcoming dips and buy Sirius before the golden quarter sends the price way up.

    Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I may buy Sirius XM stock in the next 72 hours.

    Tags: SIRI, long-ideas
    Oct 29 7:02 PM | Link | 3 Comments
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