AAPL - Sector: Technology - Industry: Computer Hardware

[ScottishTrader]

AAPL is continuing to look strong as it goes into earnings tomorrow.  There has been quite a bit of bad press, both about potential lawsuits from Cisco, and also the options scandals that have been swirling round Jobs.  These caused a bit of a pause after the two strong days on and after the keynote last week.  However, they did not force a breakdown, and it also leaves the chart looking pretty good going into earnings tomorrow.  Friday's candle was a doji, that almost touched (but not quite) the December high of 93.16, confirming this level as strong support.  Today, AAPL gapped up at the open and put in a pretty strong day, closing at 97.10, higher than Wednesdays close of 97.00.

This makes me think it looks a bit like a bullish mat hold:
http://www.candlesticker.com/Cs86.asp

While not perfect (the second day was not a down day from the open, today did not produce a new high, but did produce a new closing high), I think it is strongly suggestive that investors are expecting AAPL to beat the street's estimates of .78 on $6.42B (whether they beat their own really doesn't matter).  I'll be looking for .80-.85, but they could put in a bumper quarter beyond all estimates.  In Q4 last year they beat estimates by .04, but the last 2 quarters they have beaten the streets estimates by .10 or more.  That could make .88-.90 a real possibility, and would almost guarantee a gap over $100.

Of course, its impossible to know how the street will react, and all the AAPL exuberance may result in a contrarian blow off, but that is a risk I think I'm willing to take at this point.

[Terliso]

Man it is a thing of beauty and I want one NOW (how many other people are thinking that??? you bet - MILLIONS!!!!)

I want one too you know, but I'm gonna wait for the 60GB version & 20 hours battery life, maybe 1 to 3 years from now

***$600 is too expensive for 8GB & 5 hours battery life & 2 megapixel camera phone... The Nokia N95 already offers a five megapixel shooter, there is no memory slot for the iPhone & one more thing the iPhone has NO 3G it's pretty weak... too much things for improvement...

[Terliso]

This first release of the iPhone is the same thing as the first generation of the iPod.

--- Low hard drive capacity
--- battery life only 7 hours

All i can say is the product is not so impressive, I thought it was the first time I saw it but I digged more & found out that some of the good features are not in there.

So, the stock is good but not the iPhone, at least for now.

[ScottishTrader]

Personally I think it depends on what you want to use it for - as far as a phone goes, its really pretty astounding.  7 hours is effectively talk time or usage time, which isn't so bad, I'm sure it gets a lot more on standby.  I think the number is much more if just using as an iPod. 

As far as capacity, I agree with  you entirely - even 8Gigs is nothing for what I would want to use it for, but, that is why I'll really be looking for the widescreen video iPod - same form factor, same interface, 80-100GB HD - coming to an apple store near you (well don't count me on it, but it seems a no-brainer for them, given they already have the new form factor and all the technology, and there would clearly be the demand).  My guess is they couldn't fit all the mobile technology they wanted to in it as well as a HDD and maintain a phone-sized form - i.e. had to go with flash.  So when we start to get 8 and even 16 GB flash at reasonable prices, you'll see the iPhone spec pick up.  Also no 3G... yet.

Personally, I think the final spec could change somewhat when they actually roll it out, like they did with the iTV, but radical expectations for this iteration of the iPhone at least are probably not realistic.  So, my next question is whether they will announce an iPhone Nano between now and then as well??

[Terliso]

Apple iPhone = Origami done right?
By: Rob Enderle
January 13th, 2007


You remember Origami right? This was the consumer friendly name for the UMPC. When the first one of these came out from Samsung, it showed promise but was too big, the battery life was too short, it didn't have WAN networking, and the touch screen keyboard wasn't very good. It was also too expensive and the full OS got in the way of the "simple" concept of getting access to a few core applications that would drive the device like multimedia consumption and email.

Someone listened and unfortunately for Microsoft (who came up with the idea) it was Apple. Now Microsoft isn't the only company looking foolish right now, IBM actually came up with this idea before Microsoft did and every survey I did on the class, which was called Modular Computing at the time, indicated it would be massively successful if it was done right. And had it been done right, it likely could have done for both Microsoft and IBM what the iPod did for Apple. But Microsoft under-funded their effort and IBM didn't even try in the first place.

iPhone: More Computer than Phone

The iPhone, in concept, hits on almost all of the notes that Origami missed. It prices in at under $600 (granted with a 2 year cell phone commitment), is relatively small, has integrated WAN, and they figured out that by using Synaptics' technology they could make a touch screen keyboard work. The iPhone's interface is simple (even though the OS is based on OSX) and they did a great job of eliminating the complexity (in effect they completed where Microsoft didn't).

The iPhone is iPod attractive and when announced, moved Apple's stock price up sharply, showcasing the advantage of executing completely on a good idea and then presenting that idea in a way the market could get excited about.

When you realize that Apple only announced 2 major products at MacWorld yet stole the thunder from all of CES with thousands of vendors and millions of products, you have to feel that there are a lot of humiliated people in and around the consumer technology market today.

iPhone: The Big Risk

On the other hand the iPhone could not only make Apple, but it could break the company. The market this product enters is (largely thanks to this product) now a cross between the laptop market, the cell phone market, and the MP3 market. The laptop market is dominated by firms like Dell and HP (who regularly beat Apple on their home turf), the cell phone market which is dominated by Motorola and Nokia (who can create products for market in less than a year), while only the MP3 market is dominated by Apple and this new product class, now that Apple has created it, could easily cannibalize the MP3 market.

In short, not only did Apple just focus a huge number of companies on this new class, they gave these companies (some of which could actually respond quickly enough) a huge incentive to come up with a better competing offering. The survival of some of these companies could depend on creating a competitive offering and that is one huge incentive.

In addition, the non-Cingular cell phone companies will be going down the same path as they will see the very real possibility that Cingular could use this phone (and it's yet to be announced smaller brother) to take massive market share from the other players and so these competitors should be more than willing to fund an accelerated effort to create a better iPhone.

In the 5 months before the iPhone comes out, these folks will analyze the Apple product and come up with something that could be even better and with a motivation to do so. The next 5 months could drag on as well because this is Apple's first phone and so it is also their first time dealing with the FCC with a phone; it took both the Linux folks and Microsoft years to create something that worked right in a phone form factor; and Apple has been having some execution problems of late (they didn't announce new hardware or anything regarding Leopard at MacWorld and should have given aging lines, Vista's near term release, and their announced ship date for Leopard of June of this year).

Remember there are some other things that folks may not yet be focusing on with this device, battery life for this class has been a problem historically and phones have to be incredibly reliable. Plus brand new ports of full-featured operating systems onto small form factor devices haven't initially gone well, and Apple doesn't partner well (suggesting some interesting times for Cingular). In addition, we haven't even mentioned the expanding stock option scandal they are now dealing with which could force Jobs into more than early retirement.

In short, Apple may have created the perfect iPod killer, told a large number of people how to build it, and be unable to get the product to market timely themselves.

Changing an Industry

Regardless of whether the iPhone is successful, Apple just did what Microsoft was unable to do and focused a lot of people onto this new and potentially huge profitable class of product. Microsoft in particular is probably fuming about the fact that Apple did what they couldn't do and created a product, to Microsoft's own spec, that could not only transform Apple's market but Microsoft's as well. (CES once again showcased Microsoft as a company trying to do too many things they cannot afford to fully fund).

I don't think we will look at phones, MP3 players, or even laptops the same after this and that has a lot of implications for what we buy in the future. This device, much like the iPod did, will live off of accessories which will transform it (in accordance with IBM's original vision) into a number of different devices for entertainment, communication, navigation, gaming, and even personal computing (it is interesting to note that Steve Jobs doesn't apparently think gaming is that important).

This probably explains why a little company in partial stealth mode that has a similar concept called Integral Computing is getting a little play now as they have been working on a variant of the original IBM concept.

So this announcement goes well beyond Apple and what we saw with the iPod, this could signal a change in the PC space and turn out to be as big as the original Mac was. Of course back then, it was Commodore that initially dominated in terms of volume and Microsoft that dominated in terms of power so it will be interesting to see whether Apple has learned not to make the same mistakes twice.

Other Companies that Could Benefit

Four companies, if they scramble, could benefit from this wave greatly. Sony has one of the best  in the UMPC class of products today, it is attractive, sleek, and it is also stable and it now has a flash drive. OQO, which spun out of Apple, just refreshed their line and the product is stunning. OQO has similar capabilities to the Sony and I've been using it for a couple of weeks now and it is one of my favorite new products. Toshiba just brought out their Protégé R400 which is arguably the most advanced laptop in the world and has a leading position with regard to Fuel Cells coupled with the technical competence to take Apple's idea up to potential. HP has been in the handheld computer space for some time, is expert with the Microsoft mobile platform, actually sold iPods under their own brand, has a marketing team that is largely ex-Apple, and has been executing extremely well of late.

Oh, and let's not forget Microsoft. Apple just effectively did to Microsoft what Netscape did in 1995 with the browser and we know how that all came out.

Apple just lit a huge fire, the only question remains is whether this fire signals an even brighter future for the company or that they just burned the place down. Never let it be said that Apple isn't dramatic.

[pompano]

This first release of the iPhone is the same thing as the first generation of the iPod.

--- Low hard drive capacity
--- battery life only 7 hours

All i can say is the product is not so impressive, I thought it was the first time I saw it but I digged more & found out that some of the good features are not in there.

So, the stock is good but not the iPhone, at least for now.

While this is true for those looking for a great product, the kiddies are still gonna buy this just for the status symbol.  AAPL will continue to rise and push the technology sector along with it for the next year.

[Terliso]

While this is true for those looking for a great product, the kiddies are still gonna buy this just for the status symbol.  AAPL will continue to rise and push the technology sector along with it for the next year.

iPhone for kiddies? $600??? are u kidding me?

600 + Tax + warranty + accessories = $800 plus
You might want to get the warranty for the first generation iPhone.

[daiwa]

Comments in the charts.

[Terliso]

Daiwa, I suggest use the search button before starting a new thread

You just started a new thread for Amazon, Ebay, & Apple... these threads already existed..


Just like Setravis said:

Please use the search before starting new threads on a Stock Pick.
Chances are a thread already exist.
So why not post whatever you have to comment about on that pick to that thread.
"Simplicity" My fellow traders.   
All history on a stock pick in 1 thread is awesome.   

Thank You....and good luck with all your trades....make some $$$   

[ScottishTrader]

However, I think pompano's point is valid (and all the analysts know it).  The iPhone will sell as fast as they can produce them, certainly for the first 6-12 months at minimum, and will generate significant additional revenues for Apple, which were hard for analysts to account for before they knew anything about the product.  Given that Apple is expected to announce a potential "little brother" as well as a widescreen iPod variant, I think this suite and class of products will continue to be a near term driver for the stock price, as investors factor in its impact to the company's bottom line.

The one thing you can always say about Apple's products is they're not cheap, and quite righly so.  Apple charges its customer base a premium for innovation in technology and design, and one of the key aspects I like about the company as an investor is that they ALWAYS maintain significant margins on their products.  They will never sell a loss leader (like Microsoft).  So when you think that analysts have been modeling around $29B in revs for 08, the iPhone could add another $5-6B to that which hasn't been factored in yet, which could result in an additional $1 EPS for '08.  We all know that stocks trade on future expectations, and this is exactly why UBS raised their target to $125 immediately after the iPhone announcement.  I anticipate that analysts are holding off from performing more detailed models until after earnings today, and I expect (provided they are solid/above expectations) we will see further upgrades in the next week or so.

My point is, while I am an unashamed Mac junkie and love their products, right now I like their stock even more.

[ScottishTrader]

Oh dear....

I think things are going to get a bit silly.  AAPL has been halted after hours, and has just reported the most ridiculous, and profitable quarter in the company's history!!!  They earned $1.15/sh on revs of $7.1B, versus the street consensus of .78/sh on $6.4B, up 78% from last year, which had previously been the best quarter ever.

http://biz.yahoo.com/prnews/070117/sfw088.html?.v=86

Game over, the shorts are crushed and AAPL is going to open up HUGE tomorrow.  This is WAY beyond what even the most bullish analysts expected.  Add this to the iPhone, the fact that gross margins are up significantly and they are projecting decent (but conservative) revenues going forward, and I seriously doubt we will see AAPL below $100 for a while.

[pompano]

While this is true for those looking for a great product, the kiddies are still gonna buy this just for the status symbol.  AAPL will continue to rise and push the technology sector along with it for the next year.

iPhone for kiddies? $600??? are u kidding me?

600 + Tax + warranty + accessories = $800 plus
You might want to get the warranty for the first generation iPhone.

Not just any kiddies spoiled kiddies   "Mommy I got to have this cuz this person has it."  Also these kids that work nowadays go thru money like water, they don't save, they'll ante up.

[nullzero]

Oh dear....

I think things are going to get a bit silly.  AAPL has been halted after hours, and has just reported the most ridiculous, and profitable quarter in the company's history!!!  They earned $1.15/sh on revs of $7.1B, versus the street consensus of .78/sh on $6.4B, up 78% from last year, which had previously been the best quarter ever.

http://biz.yahoo.com/prnews/070117/sfw088.html?.v=86

Game over, the shorts are crushed and AAPL is going to open up HUGE tomorrow.  This is WAY beyond what even the most bullish analysts expected.  Add this to the iPhone, the fact that gross margins are up significantly and they are projecting decent (but conservative) revenues going forward, and I seriously doubt we will see AAPL below $100 for a while.

I dont think we will see over $100 tomorrow, im guessing it will stop just short of $100. If anything the news is good for a 3-5% gain, the big money is selling out sizable positions after all this good news.

[ScottishTrader]

ok ok I got a little bit overexcited, especially after seeing it go ballistic when AH opened.

Earnings were outstanding, but it seems their conservative guidance is pulling things down again (but they always guide down???)  Also you may be right about a "sell the news" situation hitting AAPL.  Still, I anticipate seeing new all time highs tomorrow, unless the price completely crashes.  I bought some $90 Jan puts at the end of trading to hedge against my long position, so we will see how things pan out tomorrow.  Its sure gonna be interesting!!

[ScottishTrader]

hmm... now its getting creamed... back below $95 and hitting new lows AH.  dunno what to think about this one, it could get ugly.

Analysts seem to be being pretty critical of projections going forward into next quarter