AAPL Breaks $500 Pre-Market

Eddie Braverman's picture
Rank: The Pro | 21,180

Could be an ugly day for those of us (like myself) who are long AAPL at higher prices. The stock is off nearly 30% in the past 90 days, and I'm reading about the next support levels being somewhere in the $460 range. I know this has a lot of folks panicked, but here's why I think the glass is half full.

I own the stock at an average of $590, and it's currently at $499 pre-market. At the risk of delivering a fairly pedestrian analysis of the situation, the fundamentals of the company haven't changed since I started buying it. Therefore, it's time for me to average down. Don't be sore, buy some more, right?

I happen to believe that AAPL is under such intense selling pressure at the moment because so many institutions own it so much lower, the fiscal cliff is threatening to raise capital gains rates, and they might as well sell it and lock in the profit while avoiding the fiscal cliff risk at the same time. On top of that, plenty of hedge funds need the winner by year end, so they're probably pulling the flowers and letting the weeds grow.

Is that wishful thinking on my part? I don't think so, but perhaps you can convince me otherwise. AAPL is still sitting on an ungodly amount of cash and trading at 11 times earnings. They have a number of absolute game changers in the pipeline (if everything works out) so there's explosive potential upside to be had over the next 12-18 months. Maybe we all end up kicking ourselves this time next year for not buying more under $500 (assuming we get to do that this week).

Or am I wrong? I'm actually thinking of taking profits on some GOOG and rolling that into AAPL. I'm not crazy about the idea but if we get another ~$20 drop in AAPL today I might have to. What do you guys think?

Comments (41)

Dec 17, 2012

I am sorry, but can you please tell me what "game changers" apple has in the works? They have been relying on apple fanboyism for years now without releasing anything even close to revolutionary or game changing.

Dec 17, 2012
Nefarious-:

I am sorry, but can you please tell me what "game changers" apple has in the works?

Perhaps a logo that isn't based on a fruit.

Dec 17, 2012
Going Concern:
Nefarious-:

I am sorry, but can you please tell me what "game changers" apple has in the works?

Perhaps a logo that isn't based on a fruit.

That is how unoriginal Apple Inc is. They stole their name and their logo from The Beatles record label that was formed in the 60s.

http://en.wikipedia.org/wiki/Apple_Records

http://en.wikipedia.org/wiki/Apple_Corps

    • 1
Dec 17, 2012
Nefarious-:

I am sorry, but can you please tell me what "game changers" apple has in the works? They have been relying on apple fanboyism for years now without releasing anything even close to revolutionary or game changing.

If the tv that they are working on is anywhere similar to the experience that is so simple on our ipads and Iphones then it will absolutely revolutionize tv. TV sucks a huge dick right now , they are hard to use and not really advancing at the rate that other technologies are. The TV market is largely dead and if apple can change the way it works it will be a big deal. It would be an all in one entertainment system that is very very easy to use and connect to other devices.

I

    • 1
Dec 17, 2012
kyleyboy:
Nefarious-:

I am sorry, but can you please tell me what "game changers" apple has in the works? They have been relying on apple fanboyism for years now without releasing anything even close to revolutionary or game changing.

If the tv that they are working on is anywhere similar to the experience that is so simple on our ipads and Iphones then it will absolutely revolutionize tv. TV sucks a huge dick right now , they are hard to use and not really advancing at the rate that other technologies are. The TV market is largely dead and if apple can change the way it works it will be a big deal. It would be an all in one entertainment system that is very very easy to use and connect to other devices.

I

If that happens, all they plan on doing is merging a TV with their apple TV box, which is nothing more than a TV addition that google already rivals with google tv.

I am not sure what kind of TV you have, but smart TVs already exist and enhance the viewing pleasure a lot. This is the exact type of blind thinking I am talking about. Apple is putting out a tv to rival the smart TVs that Samsung already has on the market. Nothing revolutionary here at all.

You want to know what is revolutionary? The ISP that Google is creating and has rolled out as a test sector in Kansas as a warning to the rest of the ISPs in the country.

Dec 17, 2012

How can you use a single event such as how they chose their name and logo over thirty years ago at inception to characterize a company as massive as Apple? Steve Jobs chose to use an Apple as name and icon for his company because he liked The Beatles, so 36 years later when he is dead, everyone in charge of the direction of the company must be "unoriginal"?

Dec 17, 2012
MFFL:

How can you use a single event such as how they chose their name and logo over thirty years ago at inception to characterize a company as massive as Apple? Steve Jobs chose to use an Apple as name and icon for his company because he liked The Beatles, so 36 years later when he is dead, everyone in charge of the direction of the company must be "unoriginal"?

I have never liked Apple or anything they do.

Not really sure what your point is here - if anything, you just solidified mine as to how unoriginal they are.

Dec 17, 2012
Nefarious-:

I have never liked Apple or anything they do.

Not really sure what your point is here - if anything, you just solidified mine as to how unoriginal they are.

My point was it's absurd to characterize an entire company over the way they chose their name over thirty years ago. It's a very weak argument..I'm not an Apple fanboy, and I'm not arguing for or against them being original or unoriginal. My point was if you're going to try to support your claim that they're unoriginal, do it by pointing to their products, or the direction the company is going. It is ridiculous to cite the way their founder named the company in 1976 as evidence for how unoriginal the current leadership is in 2012

    • 1
Dec 17, 2012

The company is kind of ridiculous right now - 12x trailing PE, while MSFT is at 14.55x (admittedly, that is partially attributable to MSFT's dividend). They have over 120billion in cash - this provides tremendous flexibility.

Steve Jobs was a very effective leader, but one man does not make the largest company in America. To think AAPL will fail without him is to fall victim to the "great man" fallacy.

Dec 17, 2012
West Coast rainmaker:

To think AAPL will fail without him is to fall victim to the "great man" fallacy.

Fallacy?

Dec 17, 2012
Babyj18777:
West Coast rainmaker:

To think AAPL will fail without him is to fall victim to the "great man" fallacy.

Fallacy?

Well it's debatable. It isn't technically a fallacy - more a cognitive error. But we, as a relatively individualistic culture, like to latch onto individual stories as opposed to team-based stories.

There's no denying Jobs was a great CEO. But he was supported by a great team of designers, programmers, hardware engineers, etc.

Dec 17, 2012
West Coast rainmaker:

The company is kind of ridiculous right now - 12x trailing PE, while MSFT is at 14.55x (admittedly, that is partially attributable to MSFT's dividend). They have over 120billion in cash - this provides tremendous flexibility.

Steve Jobs was a very effective leader, but one man does not make the largest company in America. To think AAPL will fail without him is to fall victim to the "great man" fallacy.

How notable is it that they will never repatriate the 100b+ they have in bermuda given the tax situation in the US in valuing them? Just saying that you would only be able to collect 40 cents on every dollar after the tax rates rise next year on dividends for everything they are holding outside the us.

"...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

  • Schopenhauer
Dec 17, 2012

Samsung is taking over ?

Dec 17, 2012

Correct me if I'm wrong but didn't Apple and a load of other Tech firms lobby for changes to the revenue recognition policies of revenues from hardware and software sales made together? I think it use to be the case that if you sold Hardware you booked the revenues today but delayed revenue recognition of the software sales over a few years? I think Apple's earnings were boosted by this change which makes the P/E ratio look lower than it should be under the previous revenue recognition rules.

Dec 17, 2012

I love how sensitive apple fanboys get when you show them how shitty and unoriginal apple is.

Dec 17, 2012

It is starting to look tempting even for a Apple hater like me. If it continues to slide towards new years I'll start loading up on every 20 dollars down.

Dec 17, 2012

The stock is now trading at an all time low P/E; no material news since the last earnings release (other than AAPL release a bearish guidance, which they are famous for blowing out of the water) and the stock has still fallen 20% = I'm buying before market close

Dec 18, 2012
onemanwolfpack:

The stock is now trading at an all time low P/E; no material news since the last earnings release (other than AAPL release a bearish guidance, which they are famous for blowing out of the water) and the stock has still fallen 20% = I'm buying before market close

quoted so can't erase

Best Response
Dec 17, 2012

For the $500 you need to spend to buy one share of Apple, you can get a shiny new Windows PC or notebook that has a full two mouse buttons and can run basic spreadsheet software.

    • 2
Dec 17, 2012

Some clarifying points:

1) AAPL is the most held stock by HF worldwide, imagine the potential damage of margin calls
2) Plot AAPL on a long enough time scale and you will see nothing more than parabolic growth
Calculate the weight of AAPL in the Nasdaq (MCAP and earnings), the results should not surprise you
3) Impact of reports such as http://www.scribd.com/doc/117055974/Citi-AAPL-Downgrade

When I saw the previous thread on the frontpage during the weekend I wanted to comment "hell yeah I am short too", unfortunately the topic was to go .. long...

Good investing!

Dec 17, 2012
phcap:

Some clarifying points:

1) AAPL is the most held stock by HF worldwide, imagine the potential damage of margin calls
2) Plot AAPL on a long enough time scale and you will see nothing more than parabolic growth
Calculate the weight of AAPL in the Nasdaq (MCAP and earnings), the results should not surprise you
3) Impact of reports such as http://www.scribd.com/doc/117055974/Citi-AAPL-Down...

When I saw the previous thread on the frontpage during the weekend I wanted to comment "hell yeah I am short too", unfortunately the topic was to go .. long...

Good investing!

This is a case where paying out a special dividend two months ago would have broken the institutional profit-taking --> margin call cycle. If they have a decent December quarter look for a nice January bounce though.

It annoys me that there are no equity 401k funds available to me that aren't 10%+ AAPL and I can't trade individual stocks.

Dec 17, 2012
Edmundo Braverman:

Could be an ugly day for those of us (like myself) who are long AAPL at higher prices. The stock is off nearly 30% in the past 90 days, and I'm reading about the next support levels being somewhere in the $460 range. I know this has a lot of folks panicked, but here's why I think the glass is half full.

I own the stock at an average of $590, and it's currently at $499 pre-market. At the risk of delivering a fairly pedestrian analysis of the situation, the fundamentals of the company haven't changed since I started buying it. Therefore, it's time for me to average down. Don't be sore, buy some more, right?

I happen to believe that AAPL is under such intense selling pressure at the moment because so many institutions own it so much lower, the fiscal cliff is threatening to raise capital gains rates, and they might as well sell it and lock in the profit while avoiding the fiscal cliff risk at the same time. On top of that, plenty of hedge funds need the winner by year end, so they're probably pulling the flowers and letting the weeds grow.

Is that wishful thinking on my part? I don't think so, but perhaps you can convince me otherwise. AAPL is still sitting on an ungodly amount of cash and trading at 11 times earnings. They have a number of absolute game changers in the pipeline (if everything works out) so there's explosive potential upside to be had over the next 12-18 months. Maybe we all end up kicking ourselves this time next year for not buying more under $500 (assuming we get to do that this week).

Or am I wrong? I'm actually thinking of taking profits on some GOOG and rolling that into AAPL. I'm not crazy about the idea but if we get another ~$20 drop in AAPL today I might have to. What do you guys think?

mundo I agree with you on most of what you said, Apple is certainly undervalued but I think you are forgetting the fact that as of now until they make more progress on the Apple TV there are simply and positively no catalysts what so ever. Apple is going to be having a pretty slow couple of months sorting out all the costs and margins issues as well as manufacturing issues.. I think we will see apple go down to the 400 range and then that will be a screaming buy opportunity if they sort out the margins . There is simply no reason to buy too early here. I think it's worth waiting and buying a shit ton of as time goes on.

Apple, if I had to guess, will probably be doing a lot of acquisitions for this TV of theirs. Probably lots of things that compliment music applications and buying out more rights.

That's just my view

    • 1
Dec 17, 2012
kyleyboy:

mundo I agree with you on most of what you said, Apple is certainly undervalued but I think you are forgetting the fact that as of now until they make more progress on the Apple TV there are simply and positively no catalysts what so ever. Apple is going to be having a pretty slow couple of months sorting out all the costs and margins issues as well as manufacturing issues.. I think we will see apple go down to the 400 range and then that will be a screaming buy opportunity if they sort out the margins . There is simply no reason to buy too early here. I think it's worth waiting and buying a shit ton of as time goes on.

Apple, if I had to guess, will probably be doing a lot of acquisitions for this TV of theirs. Probably lots of things that compliment music applications and buying out more rights.

That's just my view

don't ever say fucking use the words "screaming buy" for anything or i'll fucking kill you myself

    • 1
Dec 17, 2012

I saw that, and that's why I didn't criticize your other posts. I don't see what part of this you are having difficulty understanding. You gave an extremely weak piece of evidence to support your argument, and I commented saying that was a really dumb wait to support your argument. What about that doesn't make sense?

    • 1
Dec 17, 2012

This is why I will never invest in tech... Even the almighty Apple is fucking shit up.

Dec 17, 2012

losers average losers, right??

Dec 17, 2012

I'm gona make a bullish call right now and say Apple will break $700 after their Q1 earnings. I am not a fanboy nor own a single Apple product, but the company fundamentals are too strong. Refresh cycle, and smartphone/tablet market growth will likely help them keep incremental iphone and ipad sales up.

After reading thru some reports, the margin compression is overplayed, with trade NAND and DRAM prices down pretty much 50% of last year, and Apple still making 16 gig phones for like 2 years now, i can't see how margins will drop to 36% even with all the SKU in Q1.

Dec 18, 2012
ladubs111:

I'm gona make a bullish call right now and say Apple will break $700 after their Q1 earnings. I am not a fanboy nor own a single Apple product, but the company fundamentals are too strong. Refresh cycle, and smartphone/tablet market growth will likely help them keep incremetal iphone and ipad sales up.

After reading thru some reports, the margin compression is overplayed, with trade NAND and DRAM prices down pretty much 50% of last year, and Apple still making 16 gig phones for like 2 years now, i can't see how margins will drop to 36% even with all the SKU in Q1.

This is my thinking too. I think the bears are wrong on this one. Apple still is selling iPhones like crazy. China is a new market, sold 2M in the first day. And they don't even have a deal with the biggest Chinese carrier. This quarter will be a blowout like last years Q4. Buy as much AAPL at these prices.

In a related note, what do you guys think will happen to long term capital gains next year:
A- Increased to 20% to everybody
B- Increased to 20% only for filers with 250K plus incomes

I have not sold any of my positions yet, and I am considering selling and buying right away. But I might gamble and not sell at all if the read is on option B.

Dec 17, 2012

Why is there so much resistance to the concept that Apple no longer sells the "incredible" products it once sold when compared to their competition?

When I was purchasing my MacbookPro I was replacing an top-class Sony Vaio because three years brought a significant amount of wear to it. Apple products were absolutely incredible when compared to Blackberry at the time of iPhone launch, Snow Leopard compared to Vista, MacbookPros when compared to crappy plastic bodied laptops and iPads really steered the possibilities for tablets. After years of reaping market share, the remaining players in the game are finally pumping out some cool products that can go toe-to-toe with whatever AAPL has to offer and I for one am glad to see some COMPETITION (speaking as a consumer). At the same time Apple has really dropped the ball in coming up with new features for every line they sell. Really, I like to stay current with technology and I'm using the same old MBP and iPhone 4...I see no benefit from upgrading right now.

I'm hoping Windows 8 grabs some touchscreen market (despite contrary numbers) and its nice to see tablet laptops coming back again. Apple has enough money to dick around for a few months and get their act straight with products that actually bring those "game-changers" (iOS 6 and iPhone 5 are their worst upgrades yet imo) meanwhile their stock is sure to suffer. Linus Torvald (Linux) recently spoke against Retina displays as a joke for resolution updates when the technology already exists to surpass it with low costs.

Lastly, talking about TVs - have you guys seen those new Samsung TVs?? They are badass! Apple better have some incredible tricks up their sleeves.

P.S. Sorry for the long post!

Dec 17, 2012
sandsurfngbomber:

Why is there so much resistance to the concept that Apple no longer sells the "incredible" products it once sold when compared to their competition?

When I was purchasing my MacbookPro I was replacing an top-class Sony Vaio because three years brought a significant amount of wear to it. Apple products were absolutely incredible when compared to Blackberry at the time of iPhone launch, Snow Leopard compared to Vista, MacbookPros when compared to crappy plastic bodied laptops and iPads really steered the possibilities for tablets. After years of reaping market share, the remaining players in the game are finally pumping out some cool products that can go toe-to-toe with whatever AAPL has to offer and I for one am glad to see some COMPETITION (speaking as a consumer). At the same time Apple has really dropped the ball in coming up with new features for every line they sell. Really, I like to stay current with technology and I'm using the same old MBP and iPhone 4...I see no benefit from upgrading right now.

I'm hoping Windows 8 grabs some touchscreen market (despite contrary numbers) and its nice to see tablet laptops coming back again. Apple has enough money to dick around for a few months and get their act straight with products that actually bring those "game-changers" (iOS 6 and iPhone 5 are their worst upgrades yet imo) meanwhile their stock is sure to suffer. Linus Torvald (Linux) recently spoke against Retina displays as a joke for resolution updates when the technology already exists to surpass it with low costs.

Lastly, talking about TVs - have you guys seen those new Samsung TVs?? They are badass! Apple better have some incredible tricks up their sleeves.

P.S. Sorry for the long post!

Exactly - apple used to be known for above top grade hardware. They are losing that battle big time to Samsung. They are losing the mobile OS battle with Android. They are losing the Mobile hardware battle to Samsung and other top competitors are knocking at the door.

And ever since Windows 7 came out, Microsoft isn't as much as a laughable OS joke as they were. It is hard for Apple to claim a superior OS over Windows 7 now.

    • 1
Dec 17, 2012

Well I think right now, the mobile phone industry is getting rather homogenous. Notice NOK and RIMM. This would surely eat into AAPL market share and over time, I believe that most company in the mobile phone industry will have similar market share. Thus short apple, long out-of-favour mobile corporation.

Of course, I may be wrong

Dec 17, 2012

AAPL's multiple looks much less attractive if your assumption is that growth has peaked (which it has due to smart phone saturation) and that pricing will come down (inevitable imo, in fact Apple's mix has already declined significantly in price). Apple is not a software company and its platform does not have the moats many assumed. It is a hardware company and the price for hardware over time has always been down and to the right. This applies across the enterprise and consumer space.

Consider this. Apple has approximately 250 million active users worldwide. There are less than 900 million people who make more than $15k in the world. They are nearly 30% penetrated in their potential market (a very generous potential market), with competition outselling them at the moment.

Dec 18, 2012
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Dec 18, 2012
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and outliers cease to be brave,
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