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INDEPENDENT Financial Advisor / Professional Investor- with over 30 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice and Experience to produce Portfolios focused on achieving positive... More
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  • AAPL Update - No Emotions Please 20 comments
    Jan 28, 2014 3:01 PM | about stocks: AAPL

    The emotions of the sellers are clearly in charge immediately following the latest report .. I will attempt to leave my emotions out of this commentary and present the facts that are contained in the recent AAPL earnings call transcript and quarterly report ..

    APPLE reported revenues of $57.6 billion, up 5.7% year over year and slightly above many analyst estimates of $57.1 billion. EPS of $14.51 was above those same analysts $14.10 estimate. Gross margins ( the concerns from last year) came in 37.9%, , ahead of the 37.5% estimates. A note:- its the largest revenue number reported in a quarter by any Tech company , ever..

    iPhone ASP (Average Selling Price) rose to $637 from $577 reported in the last quarter..

    What the market doesn't like :

    iPhone unit sales were light at 51 million vs. the expected 55 million. (remember that is the analysts estimate)

    Guidance was below expectations with revenue growth down 1% at the midpoint and EPS flattish year over year. Once that was announced the Conf. call turned into an analyst feeding frenzy.. I will leave my thoughts out on Guidance presented by CEO's out of this commentary in keeping with my "no emotions please" title.. -LOL

    IMO the issue here is the same one that I mentioned during last year when the stock was selling off day after day .. The market is jousting over pricing of the stock as it evolves from the Go Go growth days to a value oriented large cap story.. At $500 it sells at a PE Of 8 (minus the cash ).. Speaking of that cash. Apple's net cash & marketable securities account increased $12B to $159B. I believe that bodes well for more dividend increase and share buybacks in the future..

    Unfortunately for shareholders , the sellers today are in force and the analysts aren't giving AAPL any benefit of the doubt as the downgrades are piling in..

    Now, back to the "pricing " story and argument. It should be noted that AAPL has not and currently is not selling at a PE of 20-25 , a typical Growth stock multiple .. Therefore , even with the growth concerns, the sell off is a bit overdone.. But those still anticipating the go go growth are selling for sure.. The company is so large that it simply can't grow like it did in the past , hence anyone expecting that is getting out..

    Other thoughts that I took away from the Conf. Call.

    Revenue from China rose 20% Y/Y. This was BEFORE any incremental sales came in with huge distribution deal with China Mobile (CHL) hit the ledger. The iPhone was officially launched on the carrier on January 17th and will start to show up in subsequent quarters. We can expect future improvement on that front.

    Apple is choosing to only compete in the high-end segment, so ASPs(average selling Price) and margins are likely to remain good in the near term, but growth will remain challenging, and with that nearly every analyst started lowering their earning estimates for the year and into 2015.

    I will temper my earlier enthusiasm when I forecasted a 650 price target for the shares this year.. However, I am not a seller here (fortunately my cost basis is lower than where shares are today) and suggest that investors stay the course. Let the market settle down and then decide whether the stock is for them ..

    The approach that I may take going forward will be to write calls against the position after the stock stabilizes to take advantage of the volatility the shares offer with their large call premiums.. For those that don't employ that strategy , I still envision upside from these now depressed levels and although I will lower my sights for the shares I will wait before I decide on a new target for this year..

    A simple increase of the Div. and another share buyback can drive the shares back to the level before this recent 40 point drop.. From a technical standpoint the shares can go lower to the 50 week MA around the $480 level before finding more support..

    If That happens I just may add shares as a "trade" , so I certainly haven't given up on making money with AAPL..

    Best of Luck to all !

    Disclosure: I am long AAPL.

    Additional disclosure: I am long numerous equity positions - all of which can be seen here..

    Themes: AAPL Stocks: AAPL
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Comments (20)
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  • So the "51M iPhones sold vs. 55M expected" was the reason for the sell off. But the reasons given in the conference call were 1) carriers policy on phone upgrades in the USA, 2) mix of more 5S and less 5C demanded causing supply imbalance on 5S.

     

    I think the sell off is overdone.
    28 Jan, 03:21 PM Reply Like
  • Author’s reply » Poco,

     

    thanks for the comment .. the tepid guidance didn't help matters.

     

    the selling is overdone , but may not be over just yet..
    28 Jan, 03:24 PM Reply Like
  • Good summary. I did not hear if they bought shares and how many. Overall good and i got more today at 504.
    28 Jan, 06:08 PM Reply Like
  • Long aapl and considering buying more!! Going to give it a few days to shake out. Thanks for a level headed commentary on a stock that has received, imho, an unfair amount of abuse from mudslingers. With Icahn aboard, and a Tim Cook promise of new products in 2014, I'm thinking that shareholder rewards should be seen this year!!
    28 Jan, 07:56 PM Reply Like
  • Author’s reply » tulip, Augie

     

    Thanks for the comments
    28 Jan, 08:01 PM Reply Like
  • Icahn just bought another $500 million of Apple stock. I'm staying long for now, but keeping an eye on it. Disappointing guidance about the next quarter. Apple needs to come out with some new products. Cook needs to learn how to sell better. Jobs knew how to create excitement about his company. Like to buy more shares, but just don't feel motivated.

     

    good summary F&G
    28 Jan, 08:04 PM Reply Like
  • Author’s reply » blue,

     

    Thanks for the opinion,, your investment judgement is top notch..
    28 Jan, 08:44 PM Reply Like
  • thanks F&G, but wish I had started being a DGI type investor in my 30s ; ) Never to late to get in the game. Maybe an old dog can learn something after all.
    29 Jan, 02:43 PM Reply Like
  • Author’s reply » Interesting article I came across today

     

    http://bit.ly/1fc9KwH

     

    Maybe if we get that 480 level i mentioned it will be time to take a serious look to add.. ..
    29 Jan, 10:53 AM Reply Like
  • Author’s reply » And here's another

     

    http://wrd.cm/1a1wQc1
    29 Jan, 11:06 AM Reply Like
  • hmmm….watching AAPL and waiting to see if it goes down. Supposed to be a lot of support now at $480….we shall see.

     

    F&G, Fed just decided to keep tapering & the market is responding with a tantrum. I'm looking for bargains. Bought some more $BA Boeing earlier but now it's down some more. I've got 10 shares left to go to fill my position of 100 shares.

     

    Then there's $BWLD Buffalo Wild Wings…place is always packed so this is a good one to own. It's down recently. I picked up some shares, will wait to see if the price goes even lower.

     

    What will tomorrow bring? Still got some cash just in case ; ) Good time to keep shopping maybe. If we go down a lot (like 10 % or more) I have my cash hoard. Which I don't like to invest, because it's the emergency fund but it will be hard not to tap into some of it. I have 3 or 4 years of living expenses saved in cash, just because I like to sleep at night.

     

    Gold is falling….here we go.
    29 Jan, 02:20 PM Reply Like
  • Gold is now going up, because the Dow is down over 200. People are over reacting. By 4 pm, the market will likely tick higher.

     

    There will be lots of hens cackling about this ; )

     

    If I was a betting person, I'd be willing to bet gold does not get to $1300. And that gold will be under $1200 soon.
    29 Jan, 02:22 PM Reply Like
  • Author’s reply » Markets are now being driven by emotion, so it may be best to sit and watch for a while,, Key technical levels were just breached and that will trigger "sell" programs by the big firms..

     

    If we cant get the S & P back to close above the 1775 level today , we may be in for more weakness.

     

    I cant figure Gold-- its a fear trade.. with tapering and higher rates down the road , it should be dropping like a rock

     

    Stay Tuned
    29 Jan, 02:27 PM Reply Like
  • There's a battle going on today, watching $AAPL hold $500.

     

    Lots more companies to report earnings, so we could go either way depending on what's reported….short term.

     

    I'm going to stay disciplined and keep going into the market slowly, taking advantage of the dips.

     

    Market can't go up all the time, and these pull backs are actually healthy. What is that old saying, "no gain without pain?"
    29 Jan, 02:40 PM Reply Like
  • Is it time to buy $DUST? Watching the pin action with gold, it might be. Tough medicine the Fed is giving us, but we sure do need it. I'd rather have the pain now than later. We know the taper will continue, so get used to it Mr. Market.

     

    No doubt this year will be a rough one, but then the volatility gives us more chances to buy stocks cheap.
    29 Jan, 02:31 PM Reply Like
  • Author’s reply » I would see where the market closes today , both equities and Gold.. the rally in gold may have a bit more to go
    maybe 1300 , IF it breaks thru 1265 or so it may just run ....
    29 Jan, 02:38 PM Reply Like
  • let's see if somebody is smart enough to sell out soon….$DUST and $NUGT are so heavily day traded it's hard to time exit points. Before 4pm today, the day traders will be dumping them both.
    29 Jan, 02:46 PM Reply Like
  • F&G did you have problems with the ice today where you live? Atlanta got hammered. Kids had to spend the night in their schools, people stuck all over the place in their cars. Some kids were stuck on a school bus & had to be rescued.

     

    The sooner it warms up, the better. My dogs are starting to shed, so winter should be almost over. They shed a lot! They do enjoy the snow & cold tho. Every time I'm outside shoveling, they have fun.

     

    Still can't imagine why anyone would want to come to NJ to see the Superbowl. It might be freezing cold, or it could be in the 40s. We have had every kind of weather in the past week, from a blizzard & below zero to the 40s.

     

    Yesterday it was 18 degrees, so not too bad. I jogged (really a sort of fast walk) over to a nearby shopping center (maybe 1.5 miles) to meet friends for coffee. They were shocked, especially when I "jogged" home instead of taking a ride. Was tempted to climb over a fence to shorten the distance, but wisely decided not to.

     

    Cold weather is a state of mind ; )
    29 Jan, 02:54 PM Reply Like
  • Author’s reply » Blue

     

    I got lucky - less than 1 inch of snow now frozen as the temps dropped here.. I am originally from NJ,, the Freehold area and still have friends there, so I know what u mean about the weather there. it has been a colder winter here also , we rarely get below freezing yet we have see a few days below 32 so far.. and now this dusting of snow.. 30 miles west of here got 6-8 inches.. so i'm not complaining at all..

     

    Stay warm , :)
    29 Jan, 03:13 PM Reply Like
  • F&G, I lived in Freehold for many years. From about 1986 to 2001…. liked it there because when we first came to NJ, Freehold had nice Christmas decorations, there were open fields (back then) and nice that Springsteen grew up there. We lived just off of rt. 537, on the east side of town.

     

    I'll bet you enjoy the warmer weather down in NC now. Plus lower cost of living.

     

    Gold did go over $1265, but $NUGT is selling off (day traders don't hold long).

     

    Looks like investors continue to buy the dip. We should know in another month what to expect for 2014. If earnings disappoint overwhelmingly, we are in for a rough time.

     

    I'm in it for the long haul. Choppy markets? No problem. Always an opportunity somewhere.
    29 Jan, 03:42 PM Reply Like
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