Apple {Is The Bloom Off The Rose?}

I don't for the most part buy individual stocks anymore for either myself or my clients.  Anything I do with these is now limited to the occasional what I consider as a deep-value play, that is something so beaten down and so cheap that the risk reward skews very deeply in my favor.  As such I don't really follow Apple Computer {AAPL}on a day to day basis.  Its short term ups and downs really don't interet me that much.  However Apple is a major component of many indicies that I own for clients.  For example it is nearly 18% of the Powershares QQQ {QQQ} which tracks the Nasdaq 100.  So I find myself out of necessity doing longer term valuation, money flow and fundamental analysis on the company. 

Without getting into the nuts and bolts of what that entails I find longer term value in AAPL.  That being said there has probably been as much negative news about AAPL generated in the financial press{both on line and on television} than I can remember in several years.  In my little informal survey there's more being generated now than even after Steve Jobs died. 

AAPL reports earnings today.  I have no idea where they will come in, whether they will beat "Street" expectations or if they will make some new grand announcement.  For all I know AAPL will blow away the numbers and shoot higher by tomorrow.  But concern has been mounting amongst investors. This morning that concern for the earnings report is pressuring the shares on the open due to  some news out of AT&T {T}.  T reported earnings before the open today and the company said that it activated 4.3 million iPhones in the quarter, down from 7.6 million in last quarter.  Now as far as I know few are looking at the obvious which is that the 4th quarter included the launch of the then new iPhone 4S.  Lower first quarter numbers then might not be a big issue.  But IMHOP APPL has a bigger problem in that at least in the short term the bloom is off the rose.

I am an early adapter to both the Iphone  & Ipad.  I did so because not only are they easy to use but I recognized the trans formative nature of these two little gadgets.  This is an important distinction because I am almost never an early adaptor to anything and I am certainly not a guy that has to have the hot new gadget or toy.  But there was  a "Wow!" factor to both products when they were introduced.  The newer versions, not so much.  My Iphone 4S is essentially a more refined version of the 3 that I bought a few years ago.  Siri was the big new thing in the last phone.  For me Siri works only about half the time.  I bought both the Ipad 3 and the 4 when they came out.  I've looked at the new tablet at least twice.  The new retina display screen while nice, is not the game changer that is making me look at the product and thinking that I have to upgrade right away.  I'm thinking of skipping this cycle and seeing what they show us in about a year.  

Now look, I'm not saying that AAPL is doomed or that there is a problem with its products.  They're going to sell many new tablets and Iphones.  The quality of these is remarkable.  I use mine all the time.  The ability for technological and innovative change these things have the capacity to unleash is mind boggling.  Yes I still think that longer term AAPL, as both a company and a stock, has the potential to do just fine.  But you can't always follow "Wow!" with more "Wow!".  In the least it eventually doesn't happen back to back and right away.  I think that is where AAPL is right now.  Oh and did I mention that the stock is up nearly 45% since December?  

My guess is that AAPL reports a pretty good quarter today and the stock has a pretty good day tomorrow.  My other guess is that the stock is going to need some time and space now to digest that big move its just completed.  Probability suggests that AAPL is going to need to build a base now for a bit.  It needs time for the earnings to catch up with the move.  The next big move I think will likely come when the "Wow!" factor returns.  In that regard the Iphone 5 is rumoured to have a release date sometime in the fall and Aaple TV is supposedly right around the corner.

Stay tuned.......

*Long AAPL in certain client accounts.  Both AAPL and T are representative components of many of the ETFs we own in both client and personal accounts.   

On the lighter side of things check out this AAPL commercial spoof where Samuel L. Jackson replaces Siri on the Iphone.  {Warning! Strong Language!  Not suitable for children and is definitely not something you're going to see me post as a video on this blog!}