Apple Stock July 2008:  Perfect Time to Buy?

On Monday Apple Computer (AAPL) announced record earnings and equally great margins only to get a 15% decline in stock price as the start of trading.  By the end of the day, the AAPL was down a little less than 3%.  As soon as I saw the uptrend in price, despite a down trending NASDAQ, I boubled up on the JAN:08 Call Options.  My suspician was that several hedge funds were predicting a “melt down” of Apple, like many of the other tech players.  That was not the case.

Wall Street seems to have a very funny way of rewarding companies that do well and apply a conservative sales forecast.

Apple has a history of being very cautious about what they tell the world about their sales.  Its just as cautious when they apply their accounting rules.  For example, when an iPhone is sold, the revenue generated by that sale, assuming a 2-year contract, is applied daily.  Apple writes to its books about $0.70 PER DAY in revenue from an iPhone sale.  This means that it has several billion dollars in commissions that are ready to be added to books in the coming year or two from sales that have already been made!  And that number is only going up.

More About Why Apple Stock is an Outstand Buy…

I am sure we’ll here before the end of the month the sale of the FIRST 2 MILLION iPhone 3G units.  There are around 50 countries waiting for iPhone sales.  In many of these countries waiting lists of 100,000 or more exist to purchase the state-of-the-art phone.  Sales in Brazil, Russia, India & China are around the corner.

All of this means that Apple is doing well.  It’s doing VERY WELL!  It is one of the few companies, especially in the telecommunications market/mobile phone handset market that has a diverse product mix and has positioned itself as a market leader for many years to come.

I made several predictions just weeks ago about Apple, and none of those positions have changed!

But, late afternoon on Monday Wall Street forgot all of this and punished a market leader because their next quarter will not meet the expectations of fund managers.  What a message to send out…

I wonder what would have happened if Apple “hyped” a few products that are upcoming, and added that they have beaten expentations for many quarters  — would that have made a difference?  Would “hype” be a reason to have held on or add Apple shares?

The best reason to purchase or add to Apple shares is because as a company they are doing everything right.  Everything from product design, marketing to corporate leadership is the “Best of Class” and that is something that is very lacking in this day and age.

My predictions for the next few years:

• Apple is already the number 3 computer maker in the USA.  It will inch it’s way up to #2.  I don’t feel that it will hit number one, because the top position is the “thin margin game” that Apple products are not cut to win.  Rightfully so  –I like things that work without headaches.  The #2 ranking for computers is fine  –However, the power of Apple Computer is that they have a MIX of PRODUCTS that cannot be matched.
• The iPhone will be the all-in-one device that we’ve been waiting for. I hope the iTouch will increase in size and become an all in one computing device (less the phone).  Of course, with faster and faster wifi speeds, it could become a communicator from a hot spot.  I feel that the iPhone line will actually have double the predicted sales that Apple has targetted.  Both devices will be greatly enhanced by third-party software making possible untold applications.  This will be the real power of the device for years to come.
• Lastly, with a combination of set-top device, handheld and laptop/work computers, Apple will corner a huge market share by enabling ALL the devices to share information and synchorinize their user data. Yes, it’s “cloud computing” at it’s best where the “tech” is taken out and the function that people want works seemlessly to help us manage and use the information at our fingertips.

This is the future, and Apple has made huge inroads to becoming the leader in this process.  I plan to “ride the success of Apple” for about a year with my options purchases.  And as far as being a customer of Apple products, that will continue for many, many years. I think it’s always a good idea to keep rewarding the companies that make products that make our lives better.  It is true for my shoes, to clothing to my gadgets –I’ll keep rewarding the best in the world.

Carpe Diem,
Rich Sage