The Worm Finally Turns On Apple, Inc.

All good things come to an end, and the run in Apple, Inc. (AAPL-NASDAQ) was quite remarkable, although that will provide little solace to the bulls who assumed the recent pause would would refresh their P&L's. With earnings guidance coming in light this stock is getting a haircut in after hours trading:

``Apple is disproportionately exposed to a potential slowdown,'' Toni Sacconaghi of Sanford C. Bernstein & Co. said in a Jan. 18 report. He is the top-ranked computer analyst by Institutional Investor Magazine. ``The upside from improved profitability may also be more limited this year.''

Profit this quarter will be 94 cents a share on sales of $6.8 billion, Cupertino, California-based Apple said. Analysts estimated $1.11 a share in profit, and revenue of $6.98 billion, according to a Bloomberg survey. Bloomberg

Congratulations to all that caught the multi-year move; when I discussed the merits of my iPod with my rotund Chief Investment Officer, at a split adjusted $13 in the spring of 2004, the market cap was above my SMID- cap mandate and I have forever remained on the sideline, with the exception of a few inconsequential trades during its run in 2006. Perhaps multi-year highs are baked into the chart, but given it is Apple the chartology might resemble a form of voodoo economics. A dose of reality will hit the Apple faithful tomorrow, however.

Meanwhile, is the worst over? The VIX finally gave readings, at 37ish, that provoked talk of a bottom. Have the banks and brokers bottomed, too? Will the valuations entice the value folks to increase their exposure to the beleagured sector, or was today a one-day wonder? Better times would be welcome news for Richard Pzena and Bill Miller; those dogs might finally have their day.

Going through your stocks one at a time should turn up some compelling bargains; our model is finally getting us a bit longer thanks to godawful sentiment, oversold stochastics, capitulation readings on the VIX and compelling valuations on a stock-by-stock basis. This too shall pass, but Bernanke’s second term remains in doubt and a “V” bottom is likely a pipe dream. Still, a respite from the selling might give the BuySide a chance to get their heads together and pick through the wreckage.

Hopefully the talking heads who incessantly pitched Potash (POT-NYSE) at the end of 2007 stepped up today. Dennis Gartman just pitched it on Fast Money, and the weak hands in this stock have likely been shaken out. The Horsemen might be another matter, however. Not even Fake Steve can spin the guidance, although he speaks the truth.

Apple Profit Rises 57 Percent; Shares Fall on Outlook
Bloomberg
-----------------------------------------------------------------------------------------------------------------------
The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

Comments:

<< Back to main