Hi Reid,
Thanks, I saw those stories. Evidently, that was one thing that drove down the price of AAPL over the past few sessions. But this may not be a negative at all, according to UBS:
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AAPL (AAPL) 66.40 +1.14 : -- Update -- UBS says that news reports (7:19) confirm their view that there could be shortages of iPods outside of AAPL's retail and online stores into Christmas. Firm continues to believe that iPod demand will remain strong through the holidays and that shortages can continue to occur as demand outpaces supply. Firm believes that certain retail shortages actually benefit AAPL, by driving customers to its stores or to the co's website, where AAPL can retain higher margins and maximize the up-sell opportunity to peripherals and Macs. Also, firm believes that AAPL made a very concerted effort this qtr to stock all channels, and reports of shortages likely mean that demand is higher than forecast, which could lend upside to their ests for 3.8 mln iPods to be sold in 1Q05 (Dec) with EPS of $0.46.
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Here's what Piper Jaffray has to say:
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Apple Computer: iTunes update points to upside to estimates - Piper Jaffray (AAPL) 66.60 : -- Update -- Piper Jaffray is positive on AAPL following yesterday's news that the co has sold more than 200 mln songs since the launch of the iTunes music store in April 2003. Firm believes that the iTunes update points to upside to iTunes numbers for Dec (firm is currently modeling for iTunes to account for 3% of rev in 2005). Based on yesterday's update, it appears that the weekly iTunes run rate is approx 5.5 mln songs per week, up from the 3.5-4.0 mln range in the Sept qtr. Based on this run rate, firm now expects iTunes downloads in the Dec qtr to reach 68.5 mln vs their est of 52.1 mln. Firm does not see the stock's valuation as outrageous at 29x their CY06 EPS est. Reits Outperform and $100 tgt.
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There is another entry into this market from a small company now:
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Apple Computer: iRiver prepares color screen iPod mini rival - Theregister.com (AAPL) 66.60 : iRiver's parent company, ReignCom (RGNMF.PK), has revealed the portable music player maker's next major release: the 5GB hard drive-based H10. The H10 will be aimed squarely at Apple's iPod Mini, itself expected to be updated early next year from 4GB to 5GB, to better compete with new rivals like the H10 and Creative's Zen Micro. Unveiled this week by ReignCom, iRiver's parent, the H10 will sport a 1.5in colour display, photo viewer, a voice-recording facility, FM radio and a text viewer. The player will boast Microsoft's (MSFT) PlaysForSure branding.
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Couldn't find a chart for RGNMF or iRiver. iRiver does not seem to be public, but RGNMF is evidently a pink sheet stock. It doesn't appear to be trading, and has a price of $0.00 for some reason.
There are other competitors, but none serious yet:
forbes.com
Here's the chart on AAPL. Note the BB contraction (not yet severe, but still relatively contracted):
139.142.147.218
AAPL reports in about 3 weeks. They have beat earnings estimates now 7 times in a row by an average of 69% (range, 13% to 238%, median 40%). That makes them an excellent candidate for an earnings play, at least. In these situations, I watch how the stock trades into earnings. If there is a ramp up into earnings in the week or so prior to the report, it usually means traders have priced in an upside earnings surprise, and there may be a selloff on the news, even if they beat the street. If there is little or no ramp up, the stock can be held through earnings, and if there is an upside surprise, the stock will usually keep moving up. This has been AAPLs recent history over the past year or so.
Their big meeting is in January also (Jan 10 - 14 in San Francisco), and earnings are announced right in the middle of that. There will be news there, something surprising no doubt. Rumors are flying: an iPod phone, a partnership with one of the satellite radio firms, a bigger hard drive, new high-capacity batteries, etc.
One thing I have learned about AAPL: they don't make many mistakes. Especially with something simple like inventory and supply issues. So, I'd say the apparent inability to meet demand is not a surprise to AAPL, and is likely by design.
Another thing I have learned about AAPL: they have forgotten more about clever and effective marketing than most companies will ever learn. They have learned something from companies like Coca Cola about branding and image and sophistication.
Then there's the business model for revenue stream from downloads (hit the 100 million mark in summer, but has doubled since then):
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Booming iPod sales have also spurred purchases at Apple's online iTunes Music Store. The two are designed to complement each other: the only portable player that supports songs downloaded from iTunes is the iPod.
Apple reported Thursday it has sold more than 200 million downloads, which cost 99 cents apiece. That's an increase of 50 million songs from just October, said Eddy Cue, Apple's vice president of applications.
biz.yahoo.com
fool.com
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The moral of the story, in my view: BUY ANY WEAKNESS IN AAPL.
I got stopped out of AAPL about a month ago, missed an entry a few weeks later at the 20 sma just before a breakout on solid volume, and spent the next several weeks waiting for another opportunity. Finally got an entry when AAPL again corrected back to the 20 sma, and figured I better take advantage.... not many opportunities present themselves with AAPL, and we are in xmas/end of year rally mode. It might be quite a spell before there's another decent buying opportunity.
AAPL is rapidly turning into a gorilla. But I think they are just laying infrastructure with the iPod. That is lucrative and stand alone, but I believe the real plan is to use the iPod as a steppingstone to grab market share for iMacs. Lots of good selling points, not the least of which is the fact that they are all but impervious to viruses and trojans and spyware. The PC market by virtue of its volume is where the real money is. Given the branding and image genius they have demonstrated so far, this scenario may be much more likely than it seems.
Personally, barring some major unforeseen problem, I will hold at least into earnings, and probably indefinitely, and add on any dips. AAPL is clearly in the sweet spot and still gathering momentum. Off the top of my head, I can't think of a better medium/long term investment stock, and it is also a good trading stock.
I don't encounter many situations that prompt me to up the ante, but this is one.
JMVHO.....
T |
