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Timothy Perdian
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Investing in stocks or twenty years, undergraduate degrees in Englis and Genetics from the University of Wisconsin. M.A. in Creative writing from University of Wisconsin-Milwaukee. And a Doctor of Chiropractic degree from NCC. Post graduate Certificates in Worker's Compensation (California),... More
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Making Money With Money
  • Tim Cook Faces Waterloo As Apple Reports Earnings 0 comments
    Apr 23, 2013 1:03 PM | about stocks: AAPL

    While the stock and the company are different entities, a CEO cannot see the price of his company's stock cut in half without hearing footsteps. And those footsteps are of a new CEO waiting to take his job. Tim Cook is popular with the Apple (NASDAQ:AAPL) faithful. However, the unfaithful are making noises about replacing him. While Apple remains one of the most profitable companies in the S&P, growth has stopped or rapidly decelerated for all the main products, the iPod, the iPhone, the iPad and the Mac. Mistakes like Mapplegate have not been handled well. Large investors see smoke and they think fire: fire Tim Cook.

    Tim Cook is human, he knows what is going on. It is relatively easy for a CEO to cook the books by shifting costs forward, sales backwards and stuffing the channel. My guess is Tim Cook will not risk another miss. Apple has beat Wall Street's estimates only one time since Steve Job's died. His death resulted in a billion dollars worth of positive press. That jump started sales. However, lower forward guidance with decreasing margins and sales seems inevitable. That will sink the stock to cyclical lows.

    Since Tim Cook became the CEO expectations have been high and have not been met. The iPhone 5 puzzled and disappointed those who wanted a larger phone and confounded non-power users buy its only incremental improvements over the 4s. Power users loved the speed and slightly bigger screen, but for the 95 percent of average cell phone users those changes were no big deal.

    So what should investors do? Those who sold Apple near the top can get ready to buy shares at 350 that yield 3 percent. This would enable them to double there shares sold at 700 and to double the yield. That is a great deal. But for new investors does the falling knife keep slicing through bank accounts? All stocks go through cycles. Even the great Warren Buffet's Berkshire Hathaway stock has been cut in half a couple of times. Apple is clearly a company that is in crises mode. I explained why in the link article. However, catalysts like an increased dividend, a new CEO, a new product, simply a larger phone, and a phablet are just around the corner. Of course I don't know this. I am expressing an opinion based on years of following Apple and other stocks.

    Finally if Apple dips to 350 in trading after the earnings report it would seem to be a good buy for long term investors. Short term, who knows. For option traders, selling the 2015 January 350 put for 75 dollars gets you into the stock at a price of 275 if you are put the stock. The dividend would be a healthy 3.85 percent with a realistic possibility of an increase down the road. Given this even after bad earnings Apple may finally be cheap enough for conservative investors to look at closely, who know maybe Warren Buffett will back up the truck.

    Disclosure: I am long AAPL. 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.

    Additional disclosure: Note my last article on Apple received over 14,000 page views and 100+ comments. I think this article is timely and makes a strong case for a reasonable approach to buying stock. Thank you for your consideration.

    Themes: long-ideas Stocks: AAPL
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