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RVB's Market Musings

What began here as an avenue to interact and learn has far exceeded those goals.

If you are a prospective employer, please consider this site a place where you can see my passion for investing...

Wednesday, March 29, 2006

An Apple a day...

Photo Borrowed from Apple Website, iPod is likely copyrighted or trademarked by Apple Computer
...could lead to a healthy portfolio! Apple Computer (AAPL - chart) seems like a good, low risk play at this level, having pulled back to a low 30 multiple, and its 200-day moving average. The stock is certainly all about the iPod, and last quarter's earnings report wasn't enough to push the stock higher because they said they expect $4.3 billion in revenues for this quarter and the street wanted $4.8. Should that mean Apple's market cap get reduced by 28%? That doesn't seem logical, does it? I mean, Apple pulled in $5.7B in its last reported quarter and the street expected $5.04 - that, my friends, is crushing expectations. However, we must think about the potential negative. Perhaps the revenue guidance means Apple's growth is slowing drastically. But, even at 4.3B for this quarter, Apple's growth rate compared to the same quarter last year would be 32.5%. I'd be willing to pay 33x trailing earnings for that.

Let's take this further and think rationally (some people just look at the financials and stop there - that's scary business to me). Has anyone been to a mall lately? Those Apple stores are still as crowded as any college bar on this campus on a Saturday night (okay, there aren't lines waiting to get into the stores that I've been to). The big pullback of '06 looks more like profit-taking to me than any actual fear that the company can't continue to sell the heck out of those iPods.

With a little checking, we can see that shares were exchanging hands quickly in Q4 '05, but like I mentioned before, the stock has not performed well in '06. I'm curious to see the update to these filings in a few days. Regardless, I think this selling is overdone. I also love the fact that 7 analysts rate Apple a "hold". That keeps expectations down. Apple is still a buy, and this selloff reduces some risk. One interesting thing that may be worth keeping an eye on, however, is that Sigmatel - a flash memory supplier for the iPod Nano and Shuffle - cut its guidance partly because inventories are building up.

Still, at $62, I wonder how bruised the Apple needs to be in order for its shares to fall much further from here.

Finally, can we petition Mr. Jobs to change Apple's ticker to IPOD?

Next AAPL Earnings Release: April 19th, After Market Close

10 Comments:

At March 29, 2006 10:21 PM, Anonymous Anonymous said...

I looked into the sigmatel issue. Their inventory of their *new* chipset are building up because everyone is slow to adapt to them. Some of the features include DiVX and MPEG4 video playback, which apple has no use for because they use their own quicktime. Also, sigmatel's expensive new chipset is their push to enter the HDD-based player market, where Portalplayer is already Apple's main supplier.

Bottom line is this problem is all Sigmatel's and has nothing to do with falling demand for iPods.

 
At March 30, 2006 4:05 AM, Blogger rvb1977 said...

Thanks for the clarification. I hope to look into it more myself.

These are the types of things we want to think about.

BTW - are you an Apple bull or bear?

Love the MPEG-4 reference - I did a year-long research project on it my senior year of college. Neat stuff...and at the time they weren't sure how to get it to work.

 
At March 30, 2006 6:10 AM, Blogger NO DooDahs said...

paper

Link is to paper on momentum and mean reversion. Given the volume and run-up, statistically I don't like AAPL's chances. I hope the html comes through, if not, copy the stuff in the "" and paste in your browser.

I haven't done any TA on AAPL and it doesn't fit my quant jockey recipes for short or long, so I'm neutral.

 
At March 30, 2006 10:58 AM, Blogger NoKeating said...

Any concerns over the lawsuit abroad with The Beatles' producer? Are you worried that Jobs may begin to focus more on Disney and Pixar than Apple? Do you see any significant growth on the PC side from the conversion to Intel? I have been keeping my eye on Apple, but questions just keep popping up. The price is still to high (from a straight dollars standpoint) for my speculative portfolio, and I am afraid it may still be too risky (or costly) for my long-term bets. But great analysis as always.

To answer your questions on my page, I did get a GA and am very excited to hear that there may be a parking spot in my future. They have told me little, other than the fact that I got it. And you are absolutely right about the investor in me...saying no to Kelley may be very hard. On top of that, I spoke with a recruiter at American Century and she said they place more weight on Kelley's IM academy than Kellogg in general. Surprising, but good to hear it.

Sorry so long.

 
At April 05, 2006 8:17 PM, Blogger rvb1977 said...

More on apple - hopefully I'm not suffering from "relative bias" but is it just me or are more people walking around with apple laptops these days? What gives?

Nokeating - Good luck with your decision. You can't really goof this decision up NW and IU are both good places to be :-)

 
At April 06, 2006 1:31 PM, Blogger NO DooDahs said...

http://stockcharts.com/h-sc/ui?s=AAPL&p=15&yr=0&mn=0&dy=3&id=p63196235510

http://stockcharts.com/h-sc/ui?s=AAPL&p=D&yr=0&mn=6&dy=0&id=p20858262075&a=73800051

No lie, I think you may want to book some profits on AAPL tomorrow. 16% off news like that is definite overreaction (even if you think the trend is up), and given the spike on the daily and the topping on the 15 minute chart, might want to be happy about the gain.

 
At April 07, 2006 9:06 AM, Blogger NO DooDahs said...

You could have saved about 3.5% getting out this morning ...

 
At April 07, 2006 9:57 AM, Blogger rvb1977 said...

Wow...are you losing a little patience?

I agree, sorta. I'm just kind of a long term bull here. Love the pessimism.

I think we're going back to 80...

 
At April 20, 2006 11:32 AM, Blogger NO DooDahs said...

http://www.marketthoughts.com/forum/viewtopic.php?t=1627

 
At April 20, 2006 12:29 PM, Blogger rvb1977 said...

Yeah, yeah, let's not forget that the market is reacting positivley to *cough* lowered guidance.

I love how you insist on being right. What does it matter, to be right..okay maybe slight bragging rights, but that's what makes a market.

I'm staying bullish. I had a big writeup planned, but blogger ate it, so it never got published.

It was a good quarter, and the pattern, from a technical standpoint might be an inverted H&S. At any point, I think the bottom is 60, and I think the stock's worth 100.

 

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