As anticipated, AAPL shares came under pressure upon the recent new product announcement. This has been the case for the last few product announcements, as investors bid up the shares going into the event, then , "sell on the news" .
However the weakness that the shares are presenting today as many research firms downgraded the stock is a bit overdone. Most were "disappointed " with the products and the pricing structure..
Negative views on the company are everywhere. Criticism is now overwhelming and many are ignoring any of the "good" news that is present in this "story"
When I first recommended AAPL , I suggested to "keep it simple", and keeping with that theme, I will present the factors that suggest the sell off today is a buying opportunity.
Hers is what really matters - margins & earnings. And here is what I heard yesterday .
Apple is keeping its three product, three price point strategy, but instead of moving the iPhone 5 down to ~$500 wholesale as would normally be the case, it is replacing it with the 5C, which I believe will serve the dual purpose of moving demand up from the low end and improving gross margins.
Totally lost in the conversation today is the fact that NTT DoCoMo (Japan) is adding the iPhone, which will add approx. 10 million units to the bottom line. That will indeed add to future EPS increases.
Along with the Japan deal , it seems that most analysts have either written off or forgotten the China Mobile deal. I am of the opinion that the deal with China will be struck before the year is out. The addition of that market will have the analysts scrambling to once again upgrade their estimates and price targets. More than likely the same group of analysts that are downgrading the stock today !
Also lost in th hysteria, is that earning estimates are now increasing for the first time in a year. With the stock now trading back down to the $460 level , the risk /reward becomes compelling. For the next couple of years, Apple's current product portfolio should lead to high-single-digit top line growth, and with modest margin expansion and buybacks, double-digit EPS growth.
Lets not forget Mr.Icahns position in the company , which in my opinion puts pressure to continue stock buybacks and dividend increases in the future.
Below is a "weekly" chart indicating that double bottom @ $390, where we last purchased the shares . http://seekingalpha.com/instablog/706857-fear-greedtrader/2012882-apple-revisited-keeping-it-simple
There would appear to be support in the uptrending 20 week MA @ $450. While the "daily" chart (not displayed) indicates support somewhere in the $460 level.
Conclusion: Take advantage of the "fear" that is on display with the sell off. While I may wait another day or so to see exactly how much selling may be left , I do believe we will get that support somewhere in the $450- $460 area. For those that have not participated or others that may wish to add, it would be wise to start nibbling on any additional weakness. That action will be rewarded as I suggest we can see a price of $650 sometime late next year as the story plays out ..
All of the articles regarding Apple are on display here in this blog.
Disclosure: I am long AAPL.
Additional disclosure: I am long numerous equity positions (list can be seen here in this blog) I am short Gold via DZZ