Apple wreckage offers important lessons

Every time Apple missteps by 1 millimeter, there are a million smug blog posts saying "See I told you they would fail -- I posted that something bad would happen to Apple 6 months ago"

It's like people resent missing out on Apple's meteoric rise or not spotting their great products before everyone else. So then the slightest imperfection on Apple's (or Apple investors') part has to be trumped up to a capital crime, delivered with a heaping spoonful of smug.

No, you're missing the point, I could care less if Apple's products succeed or not, I care about the stock price. You guys have been brainwashed into thinking stock price is directly related to how well a company is doing--it's not. There are lags times and expectations, but since they aren't as quantifiable, nobody talks about them.

I believe Apple's business will continue to do well, but looking at the stock chart and the expectations, I don't think it's a great buy down here. Sure it could be, but the probability isn't high enough to get me to recommend it. I play the odds and that's why I can make outsized returns.

Tim
http://www.timothysykes.com

Mr. Sykes,

I truly believe you mean well for investors and sincerely appreciate your contributions. This is something I believe that is true of one of your colleagues, Georges Yared, as well. You both bring intelligent guidance that is to the advantage of investors.

Where I differ (and lean towards Yared's perspective), is the lean window of time in which your assessment is made and the methodology of your choosing. While I believe you are a value and joy of information to short positions, I don't think your assessments adequately consider technological innovation and its long term effect on a tech stock's price. I'm not saying you are wrong... just that short and long decisons are and should be totally different subjects.

By buying innovation, coupled with some BASIC castastrophe avoidance, I have done well with Apple, Intel, AMD, Akamai, etc for years and I expect to continue to do so for many more... because of what they may INVENT... and not what the market thinks about next quarter's outlook.

Thanks for listening,
AUGUST

Doom and gloom faces come out of the woodwork when times are rough. I continue to believe in our market and our economy, and I will do that by maintaining my positions in the market. I would rather hear, "I told you so," from a more positive approach, than from a self-serving blogger. Reasonableness and moderation are what are needed right now, not those who are marking their victories in predictions.

Hey, aren't you known as the ghoul of Wall Street? Bad times hit and there you are, out for a blood feeding. Hope you are enjoying yourself.

I just gotta respond--I'm only a bear because the variables tell me to be. And you guys shouldn't try to make yourselves feel better by saying "tough times hit everyone", "gloom and doomers only come out in bear markets"--Noooooo, you don't have to lose money in bear markets--learn to short sell, learn to not trust anyone on Wall Street, don't be such a long term investor--sometimes you gotta sell to protect your gains.

This stuff really isn't as complicated as it seems, you just need someone like me who cuts through all the misinformation. Whether I'm right or wrong, I've learned to cut my losses quickly, so I never have to worry about what will actually happen. I'm sorry to say, your golden Apple has cracked through all support (it has some at $120 and $100) so there's really no major support until $80. You must realize how risky EVERY stock that goes up this much is, no matter their business/technology/competitive advantage.

Tim
http://www.timothysykes.com

tim, I'd really like to appreciate your advice, but you have a pure trader's point of view, which does not help at all to understand what has happened on the markets during the last year or so. this has become a totally irrational game to play and that's no fun. being so bully in such a period is just plain stupid, IMHO... You won't get a single penny from me. Sorry...

Tim is soooooo right. I bought some apple at 161 and today it was down like 30 points to 128 and it was not due to this quarter's earnings - no. It was due to 2nd quarter predictions - The street had higher expectations of what predicted earnings for next quarter should be than Apple's own predictions. Granted, Apple tends to be conservative with their predictions and the price will be back up in the next couple of days - i am starting to get a little off track.

The 'Trading Perspective' isnt anti-long term. Because stocks are based on "Future" expectations, isn't it possible that these stocks get ahead of themselves and become WAY overpriced? Of course, and that is why it is important to realize when these stocks are overpriced, beyond their resistence/support levels and to do oneself a favor and sell. Its not to say that one can't repurchase after a correction, but realize this, you gotta take some gains before they get taken away from you.

Any chance AAPL will return to the $200 level this year?

Just wanted to point out a few things:
Maybe it's just vague phrasing, but it seems you are implying Apple missed the consensus earnings estimate. In fact, Apple actually exceeded even the most enthusiastic analyst predictions. What it did not do is meet the absurdly optimistic rumors floating around of earnings in excess of 1.80/share. It's basically set in stone that Apple will lowball its estimates, analysts will set higher estimates, and rumors/buzz will make very optimistic predictions. Having held Apple stock since the return of Steve Jobs, I've come to expect/assume large drops on any earnings report that doesn't live up to the unrealistically high rumors. Earnings almost always outperform Apple's predictions, and often outperform analysts' as well, but unless they are truly phenomenal they will not overcome the ultra-high expectations that investors seem to have for Apple. If you look back at previous earnings reports, you'll find that even on what are truly phenomenal earnings (far, far above analyst predictions) Apple's stock will take a hit due to investors' (and probably Mac fanboys') hugely inflated expectations coming into the announcement.

I agree Tim. The stock rises when things go better than expected. iphone sales were below expectations, so that momentum was removed. The Apple TV is not taking over the world (yet). But the general economy is getting to it. I don't know what to expect for Apple.

Tim,

Great call. How many shares were you short and can you give a precise target for the future?

Don't you think your victory may be a little premature?

Beltway Greg
Show me the money

Scott Cacciatore gives his opinion on Apple Stock (aapl)

Apple stock which once traded at 200 in December of 2007, just over a month ago actually traded down to 125 during yesterdays wild day of trading. Now I am not saying that 200 was the correct price for this stock but what I know is the facts. Apple reported outstanding earnings for the 4th quarter of 2007. They blew away analysts forecasts and normally this would signal an upswing in the price of their stock. However, they lowered estimates by 12 cents for the 1st quarter of 2008 and because of this the stock lost over 17% in the one day after it released their earnings. The economy overall is in a recession and I believe there is a good chance that we will fall deeper into a recession and things will get worse before they get better. Apple reported outstanding earnings in the 4th quarter of 2007, the very same quarter that most companies are reporting lower then expected earnings. If you were anywhere near an Apple store during this holiday season you saw why. I went into the Apple store 4 times this holiday season to buy an Ipod and everytime the wait was more then 45 minutes to speak to an employee. The store in New York City had lines out the door because the crowds were so large. Apple's various versions of their Ipod are still their big seller, but now Apple has successfully cracked into the cell phone business with their widely popular I-Phone. Apple has also had significant sales increases in their Macbooks. The Mac has been reported to be a much more durable computer then their windows based competition, namely the Dell, IBM, HP, Toshiba, etc laptops. Apple offers a very durable fun notebook experience and also offers their computers in various colors, which is rarely seem from their competition.

Yes the stock is down to around the 130 level, and yes their is really no support at these levels or lower levels because the stock has basically been on a steady increase since almost going out of business 8 years ago or so.

An investor can now buy this stock at 130 when it was 200 a little over a month ago, and what has really changed? The stocks earnings were great, better then almost any other company that reported earnings this past quarter. Also, it doesnt seem like the downturn in the economy has hurt Appls bottem line in the least. Apple has proved to be very resilient from the recession woes and has actually thrived. Yes they expect slighty worse then expected earnings in the 1st quarter of 2008, but I think this is to be expected. The general public stocked up on all of the Apple products during the holiday season, I wouldnt expect these same people to be rushing into apple a month or two later to purchase a new product.

I think Apple is a great buy at these levels and if the stock decreases it would be wise to continue buying this stock on the way down, to average down. Its a stock that has proved resilient to the recession problems, is not affected by interest rates or by mortgage and credit issues like the financials and should actually become more popular as their Macbooks and I-Phones become staples in the households of the general public.

Of course this is just my opinion, and you can read all these blogs and turn on the financial networks and hear thousands of opinions everyday.

Scott Cacciatore thinks Apple stock is a good buy.

Answer: Tim was short 0 shares. How about a little $5K side bet Tim? You pick a price; I pick a price. The individual who is nearest as of Dec. 2008 wins. And yes, you can go over or under. Kind of like horseshoes. Check my posts though I proposed a $1 million dollar bet with Citi last Spring when their analyst downgraded Apple.

Cue the crickets.

Beltway Greg

there is only one reason to buy and hold apple. INNOVATION. Every current apple product sector (not product) did not exist prior to launch.
The above debates re: multiples, missed quarters, sales per foot miss the point of why one would pay 30x earnings. Within 5 years apple produced the iphone, ipod and computer design. If you have a single other company that you have even 10% confidence in - that create billions of new sales out of thin air - start buying it. Maybe the iphone was their final good idea. I doubt it.
You have one risk here... steve jobs is gone.

The psychology of stock prices are one thing. Truly innovative ideas that make life amazing are another. The first I'll never bet on. The second I will. For all the talk about Apple, one thing is simple. The ideas for tomorrow have been at Apple for the past 30 years. My house is littered with their products. BTW... the Mac Plus makes a nice bookend. if you think my consumer nature is going to change over the next 30 years, then maybe the stock market isn't for you. Bertrand Russell's criticism of the law of induction aside, you'd better believe your sweep Bippie that Apple will continue to corner the market on ideas, and if you're not buying the stock, you should be buying the products. BTW... this column looks so clear on my 30 inch Cinema display. Pardon me, while I pop in a movie.