Apple

[Grieve]

Okay, I know you guys are not Apple fans (except Breand), but I'll sell my book one more time.

Despite the stock hitting new highs every day, I don't think it's too late to get in. Not even close. The iPhone 5 preorders sold out in one hour - it took 22 hours for that to happen with the 4S, and that was a blockbuster seller. Next two earnings reports from Apple are going be beyond huge.

If you don't want to risk too much money, I recommend call spreads. You can get them very cheaply, and make a killing if the stock takes off. Or if you want to really roll the dice, buy a Jan 2013 $960 call for $1.06 ($106). If AAPL is $1000 on that date your $106 will have ballooned to at least $4000. Another option - $895 call for $263. AAPL at $1000 would pay out $10,500...

(naturally I take no responsibly for any losses if AAPL drops to $100 )

[Vanraw]

Now, I'm convinced apple is a ponzi scheme and grieve needs a new influx in cash,,,,,,, I'm on to you Sir!

[Grieve]

(I tried to talk my wife today into using the money we were planning to use on a new car for Apple options instead, but she looked at me like I was crazy...can't understand why...)

[Grieve]

Hrmmm...well as some of you may have noticed, I'm something of an Apple perma-bull. And I've looked at this recent sell-off as the buying opportunity of a lifetime. All the things it has been based on (map gate, tax selling, growth fears, competition) I've had no problem dismissing as FUD.

However...today for the first time I'm getting my first nagging doubts, thanks to Walmart. They just started selling the iPhone 5 for $127. That's insane. Unless recently every store was sold out. I can't imagine why Apple would let them do that, but Walmart says they partnered with Apple on the deal. Is Walmart eating the loss to get people into their store? Or is Apple reducing prices because of falling demand? Whichever, if I'm having doubts, I know that means a lot of other people will be too. Which I think means a sell-off next week (especially if analysts downgrade too, which seems likely). Could drop to the mid $400s, maybe lower.

Of course, I'm still not selling. Gonna ride it out until Q1 earnings. I expect them to blow out revenue, maybe hitting $58 billion (they guided to $52b, street is looking for $54.56). Their previous highest quarterly revenue (also highest for any tech company ever) was $46b last January. I think gross margin/profits may be light, though. They guided to $11.75, street is looking for $13.31. Anything in the 12s would cause a selloff.

What really could be worrying is the guidance for Q2. Street is looking for $47.5b and $12.36. I have a feeling they will guide to something like $40b and $8.00. That would be bad. Might make me get out.

Still hoping for a big rally at the start of the year, though, once this capital gains craziness is done.

[Jakensama]

Does this mean we are still on for the double or nothing when apple hits $1000 bet?

[Grieve]

Sure...the time horizon may just be a tiny bit longer...

[Jakensama]

Degenerate gambler, before long I will have the title to your house..

[Grieve]

Now you're talking - Apple to 1000 by 2016 - if it doesn't get there, you get my house, if it does, I get yours! Let's do it. Although yours is probably worth a tiny bit more than mine since it's in NYC (or do you rent?)

[grizzle]

However...today for the first time I'm getting my first nagging doubts, thanks to Walmart. They just started selling the iPhone 5 for $127. That's insane. Unless recently every store was sold out. I can't imagine why Apple would let them do that, but Walmart says they partnered with Apple on the deal. Is Walmart eating the loss to get people into their store? Or is Apple reducing prices because of falling demand? Whichever, if I'm having doubts, I know that means a lot of other people will be too. Which I think means a sell-off next week (especially if analysts downgrade too, which seems likely). Could drop to the mid $400s, maybe lower.

Interesting. I was reading an article the other day (don't recall link, will look for it later) that mentioned something about the iPhone 4 (or 4s or something like that) was outselling the iPhone 5, and it was theorycrafting about whether the iPhone had plateaued.

[Jakensama]

Now you're talking - Apple to 1000 by 2016 - if it doesn't get there, you get my house, if it does, I get yours! Let's do it. Although yours is probably worth a tiny bit more than mine since it's in NYC (or do you rent?)

Thats fine, the idea of being a slumlord to your family is worth risking Chateau Jakensama in stately Brooklyn.

[Vanraw]

However...today for the first time I'm getting my first nagging doubts, thanks to Walmart. They just started selling the iPhone 5 for $127. That's insane. Unless recently every store was sold out. I can't imagine why Apple would let them do that, but Walmart says they partnered with Apple on the deal. Is Walmart eating the loss to get people into their store? Or is Apple reducing prices because of falling demand? Whichever, if I'm having doubts, I know that means a lot of other people will be too. Which I think means a sell-off next week (especially if analysts downgrade too, which seems likely). Could drop to the mid $400s, maybe lower.

Interesting. I was reading an article the other day (don't recall link, will look for it later) that mentioned something about the iPhone 4 (or 4s or something like that) was outselling the iPhone 5, and it was theorycrafting about whether the iPhone had plateaued.

Yea I noticed iPhone 4 is now free at vz with a contract. Also read that iPhone 4 is selling well.

On the doubts, its a matter of time that any product with the kind of profit margin of iPhone, will be impacted by competative pressures. Hopefully apple hasn't turned its marketing goals to market share. Also keep in mind that apple only has one product the drove its market cap so high. Multi versions of a single technology.

However, the china market seems hungry for iPhone. So I would not short apple by any means. Yet....

[Grieve]

I've taken a new strategy (for me). My wife's Ira has 100 AAPL shares, so I sold a weekly $510 put for around $1000. If the stock is below there at the end of the week, I keep the $1000, if not I have to sell all 100 shares.

Profitable if the stock ends the week under $520, but there is no way to lose money (apart from lost profits if the stock shoots to $600). Technically if you we're bearish on the stock you could do that every week for a year and make @$52k (100%+ return). I still think the stock will recover in the new year, tho (2m iphone 5s sold in China in three days).

[Slamz]

Also keep in mind that apple only has one product the drove its market cap so high. Multi versions of a single technology.

Yeah, that's one of my main two reasons for being dubious about the future of Apple:

#1) They have basically one product
#2) The outstanding success of that product is based largely on the fact that it's stylish. A billion people in China want an iPhone because that's the stylish gift all the VIPs have.

If, for whatever reason, some Samsung phone became the new stylish "must have" cool kids phone, Apple would crash and burn. Of course, some stylish names endure for a long time. Everyone knows "Rolex" or "Tiffany" and that's kind of the angle I think Apple pursues: not just stylish, but elite style. Must have if you are going to be seen as a modern stylish person.

Whether Apple is Tiffany or MySpace remains to be seen.



Now that I think about it, Google really dealt Apple a tremendous blow by coming up with Android. If not for that, I think the market today would be Apple vs a lot of nickle-and-dime half baked opposition. HTC-OS. MotorolaOS. SamsungOS. Every manufacturer would probably have to try and develop their own smartphone operating system to compete in the market and Google created an easy, affordable way for them to all enter the market together without the risk and overhead. Google didn't take it the next step to make it cool, though, which I think is the main reason Apple is still doing so well.

[Grieve]

Absolutey Android was a big blow to Apple. But there is room for both, as the smartphone and tablet market continues to grow.

I still disagree that Apple has only one product. The iPhone is about 50% of revenue, but that still leaves macs, iPads, iPods, and so on making up the other 50%. Mac alone is 27%, and that's been around for 30 years. So even if iPhones stopped selling, Apple would still have massive revenues and profits. And let's face it, iPhone is not going to disappear. It may not grow as fast, but its sticking around.

I also believe the iTV will be released next year and will be huge. Read the article below on AllthingsDigital - makes a pretty compelling argument.

http://allthingsd.com/20121217/all-i-wan...-apple-tv/

[Slamz]

I lump all the "iStuff" into one product. iPhone, iPad, iTouch, the new smaller iPad, etc. It's all "portable touch screen computers of various size with optional phone". I think they will either all do well together or all fall out of favor together. It's hard to imagine what scenario could make the iPhone suddenly unpopular but leave the iPad sales intact or vice versa.


My feeling is the Apple TV will miss its mark. It's a major purchase that will meet with a lot of scrutiny and isn't something people will simply run out and buy because it's new. They certainly won't run out to buy the "new Apple TV 3S" like they do with smaller devices year after year. It does seem like Apple is putting good effort into unifying the ability to get everyone you want on one device but my feeling is that their own self-imposed limitations will end up biting them -- incompatibility with 3rd party devices, necessitating using iTunes, not supporting any "advanced" features...they usual Apple pitfalls of "does not work well with others".

Apple's closed loop systems have been its greatest strength but I always feel like it makes their position precarious. If you're into Apple, you're "all in". If you get out, though, you're probably getting all out.

[Grieve]

What's interesting is that they have $120 BILLION (and growing) burning a hole in their pocket. What if they were to buy exclusive rights to, the NFL, and only show it on Apple TV/devices? Or maybe they bought Disney and do the same - they'd get Disney, ABC, Marvel, Pixar, and even Star Wars.

Sony has a market cap of just $11b - Apple is expected to make more than that in profit alone this quarter. They could buy Sony, incorporate playstation bits into the Apple TV, and make all Sony movies exclusive to Apple devices.

Seems to me they have a lot of ways to make iDevices a must-have, should they choose them.

[Jakensama]

What if they were to buy exclusive rights to, the NFL, and only show it on Apple TV/devices?

Well other than the fact that they wouldn't be able to get those until 2022, I imagine the owners and goddell would veto it before their fans roasted them alive.

[Vanraw]

Yea I lump istuf into one product. Itouch iPhone ipad is all the same. I don't see itv as big of a deal because no one has cracked that product yet, and the broadcasters don't want to share profits. In fact they are going the opposite direction with providers like dish and cable companies.

The thing that apple does have is sticky glue. People who buy iTunes apps and such might not want to switch because of invested assets. That might be why they are droping the price. To keep market share up so they can keep the Co tent dollars flowing.

China is the big question.

[Grieve]

I don't know, a recent survey found that almost half of all US consumers want to buy an Apple TV, and at a premium:

http://appleinsider.com/articles/12/12/1...20-premium

Even people I know who hate the iPhone and iPad would be open to it.

I suspect it will be priced at more like $2-3000, though. Rumor is that it will be 4k resolution. As for providers, they will probably partner will one or two at first as exclusives, just like they did with AT&T, and that will pressure all the others to jump onboard as well.

And yes, the more iStuff you have the more sticky it will be. I'm certainly not going to switch to Android and lose all the movies and apps I have on iCloud. Even a Samsung exec admitted he uses macs and iPhones at home because of how well they work together.

http://news.cnet.com/8301-13579_3-575589...s-at-home/

[Kakarat]

I don't know, a recent survey found that almost half of all US consumers want to buy an Apple TV, and at a premium:

http://appleinsider.com/articles/12/12/1...20-premium

Even people I know who hate the iPhone and iPad would be open to it.

I suspect it will be priced at more like $2-3000, though. Rumor is that it will be 4k resolution. As for providers, they will probably partner will one or two at first as exclusives, just like they did with AT&T, and that will pressure all the others to jump onboard as well.

And yes, the more iStuff you have the more sticky it will be. I'm certainly not going to switch to Android and lose all the movies and apps I have on iCloud. Even a Samsung exec admitted he uses macs and iPhones at home because of how well they work together.

http://news.cnet.com/8301-13579_3-575589...s-at-home/

I don't think that samsung exec has a job at samsung anymore...

[Breand]

thinking of getting in again on AAPL now that I'm sitting on a bunch of cash...

[Vanraw]

I think there is going to be allot of great opportunities after this cliff correction. I would love to see the dow dip to about 12500 before they solve it. Then I think 1Q is going to be a monster quarter.

[Grieve]

I'm waiting to see how Apple finishes up today. Right now the call I sold is "in the money", but my shares will get called away if the stock finishes over $510. If so, I'll sell a put. You can sell a Jan 2013 $500 put for $1470. If the stock is below that on Jan 19th, you have to buy 100 shares at $500 each, but you really only pay $485.30 because of the income on your put.

If the stock ends higher than $500 (as I expect), you don't buy the shares, but you keep your $1470.

[Grieve]

By the way, I knew I was just early in my bet with Jake. Apple now has 53% of the US smartphone market for the first time ever. Android falls to 42%. The gap is supposed to grow as the iPhone 5 ramps.

http://9to5mac.com/2012/12/21/report-iph...ops-to-42/

(As for the rest of the world, well, they obviously suck and have no taste)

[Jakensama]

Our bet was using that one review, Kantar has grossly overestimated ios numbers in the past too. Those numbers don't seem to jive with the sales numbers over the past quarters...

Here are some other numbers that paint a different picture:

<!-- m --><a class="postlink" href="http://www.pcworld.com/article/2018287/samsung-leads-mobile-market-as-apple-sticks-to-second-place.html">http://www.pcworld.com/article/2018287/ ... place.html</a><!-- m -->

53.6% android vs 34.3% ios.. Something tells me the one month more that other poll has did not make that big a difference.