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Savings Experiment: Snow RemovalThere was a story circulating some brokerage firms trading desks yesterday afternoon that the March quarter for Apple, Inc. (NASDAQ: AAPL) iPod sales may be a little light versus estimates. The Street has modeled for Apple to sell between 10-11 million iPod units for the quarter. There was discussion then that January sales actually were tracking better than the 10-11 million run rate, so estimates were moved up to 11-12 million units. The February sales apparently are rumored to be a little off pace, therefore the quarterly expectations just for the iPod may be missed. Therefore, there were some hedge funds trying to "sell" that news out in the market place, and of course, with that -- short the shares.
Give me a break. Who really cares about the March quarter numbers for the iPod? The quarterly revenue and earnings estimates should be comfortably achieved with Mac sales, iPod sales, new cpu and software upgrades, etc. The story for Apple is not the first quarter of the calender year -- never has been. The iPod sales are extremely relevant for the December quarter as the Christmas season is all important. The numbers this past December quarter were more than 21 million iPod units sold. The installed base for iPod is over 90 million units. The iPhone will be launched in the June quarter. Do you really want to be short Apple going into that hoopla? I don't think so.
I chatted with three portfolio managers about their expectations for Apple. Two of the three feel Apple trades up to $110 by July on iPhone excitement and the third manager feels Apple goes to $130-140 by year end as investors focus on a $4 per share earnings number for calendar 2008. He also feels 2009 will look like $5 to $5.50 as the momentum for iPhone continues unabated.
But the hedge fund world will micro-scrutinize every detail of Apple's March quarterly results. Their "findings" will be based on their position -- long or short. Smart portfolio managers are not playing Apple for a one quarter move -- or lack of move. This is a mega, sustainable story that has growth legs attached for the next 3-5 years. Apple has figured out the consumer desires and tastes better than any technology company of recent memory. With the power of the Apple retail stores supporting the marketing efforts, the sales predictability is a bit easier than a company relying solely on other external channels of distribution.
So let's see how the March quarterly iPod numbers come through. Hedge funds may trade around the fringes on Apple by shorting the shares for a dollar or two of profit, but anyone shorting the shares for the year will probably be badly burned.
Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing" Please visit www.georgesyared.com
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Reader Comments (Page 1 of 1)
3-30-2007 @ 11:47AM
Dianne Olivo said...
Apple is for "traders" not necessarily for investors. It just happens to have the corner on the market of anticipation. Look back over the last 5 years and you can clearly chart the swings and the option volume & interest that goes along with it. It is one of the few if not the only pure "trader" play because of it's volitility. Right now it's harder for the traders because the product anticipation is making the picture harder to read or act on.