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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: quartersawyer who wrote (80933)	10/12/2008 3:13:33 PM
From: peterk	Read Replies (1) \| Respond to of 197271

Fred Hickey's expensive bet against Apple Posted Apr 26th 2007 10:52AM by Peter Cohan This January, Barron's round table member Fred Hickey, author of the High Tech Strategist newsletter, recommended shorting shares of Apple Inc. (NASDAQ: AAPL). AAPL was trading at $85.94 on January 28th when Hickey's call became public. If you had followed Hickey's advice back then and this morning decided to cover the short position, you would need to pay $102.20 for your shares -- taking a 19% loss. I wrote a post on Hickey's suggestion and thought it was a bad idea. His argument against Apple consisted of four points: Apple was overvalued. At 20% of the size of Hewlett-Packard (NYSE: HPQ), Hickey believed that their market capitalizations were too close ($75 billion for Apple vs. $100 billion for HPQ). iPod's growth rate was "falling apart;" Computer sales were down; and The ongoing options investigation meant CEO Steve Jobs was still at risk. I thought Hickey was wrong to short Apple since there was little chance it would file for bankruptcy and a great chance for positive earnings surprise. So after last night's report I asked S&P analyst Scott Kessler for his views on Apple -- he thinks it can go to $125 in the next 12 months. How so? He liked the 21% revenue growth which was driven by what S&P considers strong sales growth in desktop and laptop computers. The gross margin of 35% was notably wider than S&P's forecast of 30%, and benefited from materially lower component costs. S&P raised its EPS estimates for Fiscal Year (FY) 2007 which ends in September to $3.58 from $3.29, and FY 08 to $3.98 from $3.81. Moreover, S&P raised its price target for the stock. Based on revised peer P/E-to-growth rate analysis, S&P raised its 12-month target price to $125 from $119. S&P is optimistic about AAPL's new product roadmap for 2007. Hickey's analysis has proved wrong on all dimensions except for one -- there remains uncertainty about Steve Jobs's future. And if he were forced out of Apple, the stock would crater. Unfortunately for Hickey, that is a weak hand with which to bet against Apple