If there was one stock you wish you had bought when it was being crushed by the financial crisis along with every entity out there, it's Apple (NASDAQ: AAPL). Shares of the company, which counts Microsoft (NASDAQ: MSFT) and Dell (NASDAQ: DELL) as rivals, have more than doubled since they hit a 52-week low of around $78 per share. Really, did we think this one wasn't coming back? Hey, I fully admit, I've been a bear on Apple at different points during the downturn. Difficult not to be, with consumer sentiment and all that.
Well, it's hard to be a bear now. Last night, the market welcomed Apple's Q4 earnings with open arms. How could it not? The first paragraph of the press release tells a story of profound growth. Sales increased 25%, and earnings per share soared over 40% to $1.82 per share.
That alone is good enough, but inquiring minds want to know how the results stacked up against analysts' projections. They compared very favorably: according to our earnings preview, Wall Street was looking for 40 cents less on the bottom line.
Not sure you can find much fault with Apple's report. The Mac and iPhone franchises appear to be solid performers. Gross margin saw a year-over-year improvement. And all is well with cash flow.
Is there anything here that would indicate that Apple is about to collapse? Not to my eyes. Apple should make for a nice long-term holding. There's no question, in my mind at least, that these results, taken in concert with data from past quarters, indicate that consumers will continue to support the Apple pipeline for years to come.
But has the stock gone too far? That's debatable. Shares of Apple were up strongly during yesterday's after-hours session. They were bid higher by over 6%, and I've got to assume that Tuesday's regular trading session will be good to stockholders. Although I feel bullish about Apple's future prospects, I would definitely ask anyone to consider waiting for the shares to consolidate, at least a little, before either starting a position or adding to one. If Apple does close at a new 52-week high, and if the volume is sizable, then it technically should be ready to continue in an upward direction. Even so, I'd watch the price action over a few sessions to get confirmation that the market is still on Apple's side.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
10-20-2009 @ 10:52AM
Beltway Greg said...
If you even think about selling this stock before $230.00 you've:
a. become your own village idiot.
b. proven you have no aptitude for investing.
c. taken leave of your senses.
d. been hosed yet again by the funds that'll drop this, look at the action yesterday, from 3:45-4:00, stock before they steal your shares.
e. lost money.
f. all of the above.
g. started to take Cramer and Fast Money seriously.
Look don't do anything stupid and it will be hard for any company to fight the tape if everything goes bad at once but with Xmas and China and customer satisfaction and the accounting and ...........
you do the math. BTW, they're still having that twofer sale on Blackberrys at the Verizon store. RIMM makes phones. Apple has created synergistic devices which make life easier. I've tried so hard with you people.
10-20-2009 @ 1:40PM
Iridium said...
Apple isn't worth $230. It may get there but it isn't worth that much.
Apple sold off huge overnight after hitting it's high. It is now heading right back up above $200. It will then sell off huge again. Apple is already at it's all time high. A level reached during the insanity expansion. There isn't much support above $200 a share. A realistic valuation might be $100 a share since $200 still represents 35 times earnings.
Apple is being manipulated as much as any other stock right now. Much of Apple's profit came from an increase in gross margin. In other words, a drastic reduction in the cost of production while keeping wholesale prices at the same level.
If sales do start to decline, which they will, Apple will need to cut prices which will reduce the gross margin. The cost of production can't fall much more so further margin increase can't come from there.
Good for Apple but people are still morons for paying $300 for something Apple makes for $40.
10-20-2009 @ 2:59PM
Beltway Greg said...
Morons? Sounds like someone is a little agitated that they wouldn't pay $100/share for something that was clearly worth $200/share. "Much of Apple's profit came from an increase in gross margin." Are you sure? "Sold off huge." No my friend that was the maker of that thing you carry in your pocket, the Blackberry.
10-21-2009 @ 9:21AM
Average White Boy said...
Why is it that Apple is always being questioned about whether it's going to collapse the next day? Are there any major indications that demand for it's products are rapidly dropping or that it's starting to close it's retail stores or that it's burning through it's reserve cash or losing market share in any of it's product categories?
Apple has yet to start sales in China, it's huge data center has yet to come on-line, there are talks of building a billion dollar factory in China in cooperation with Hon Hai Precision/Foxconn just to keep up with demand. Apple's usually best season is just coming up and some of you commenters are still yapping about Apple's share price starting to backslide already or it isn't worth this or that.
This crap about buyers of Apple products are being fleeced is so damn stupid. People have always been eager to pay for premium goods with a brand name even though materials are basically the same as a no-name product. Mostly any products made overseas are far more expensive than what it actually cost to make. You don't have to be a genius to know that.
There are plenty of stocks that aren't worth near what people are paying for, so what. That's an investors decision. As long as I'm making money, it's good for me. I got hurt by a lot of China stocks that the bottom fell out of. One minute they were supposedly worth something and the next, they were nearly worthless. Apple target prices are much higher than the stock is, so I'll go with that. You stick with Microsoft or Boeing, OK.