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August 07, 2006
Can Jobs presenting flair revive AAPL's shares
The Apple store has put up the "We'll be back soon" banner that's the final warning before master marketer slash CEO Steve Jobs takes the stage to unveil new products, as he will momentarily. Various rumor sites indicate he's likely to fill in the fourth and final box of the company's transition to Intel chips by announcing high-end desktop PCs to go along with the Intel-powered iMac, Macbook and Macbook Pro. Maybe there's also a new ipod or a spreadsheet, who can say.
What stock investors would like to see is some levitation of Apple's shares, trading today around $68 or $69 down from a high over $85 in January though up from recent lows almost touching $50. The stock has been beat up over options dating woes, fears of the coming MSFT Zune onslaught and slowing ipod sales growth.
But I saw recently that Harry Lange, manager of the Fidelity Magellan fund, bought almost 2 million shares of Apple this year. That ought to be a good sign of value, as Lange has long been top notch timing tech names. Then again, his colleague, Will Danoff, dumped almost 1 million shares. Still the paper twiddling Danoff kept a big position as of 3/31, as did the folks at Calamos Growth Fund and Scott Schoelzel over at Janus. That's some pretty smart money betting on more magic from Jobs.
Updated at the close: Investors were underwhelmed with Master Jobs on this day. Anticipation had AAPL shares as high as $69.60 as Jobs started talking but after he trotted out the obvious Mac Pro desktop computer, discussed some dull features of an OS upgrade and had no "one more thing" to unveil, the shares tanked and finished at $67.21.
History has shown, of course, that the market's immediate reaction to Apple product introductions is not to be trusted. Set the way back machine to October 23, 2001 and you'll discover that Apple lost about 5% on the day the ipod was introduced. The closing price that day? A split-adjusted $9.07.
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In June 2006 we posted a revised evaluation line for AAPL with a buy below and sell above $72 signal. At the time everyone thought we had lost it. Numerous articles appeared all over numerous blogs calling for the demise of APPL. We stuck with our fundamental analysis platform. Now that the stock is up 25-30% everyone seems to agree.
Job’s gadgets as we like to call them are an insurance policy against a possible slowdown on big ticket items for Q2 and Q3 in 2007. The long term prospects for the PC market are intact. As expressed in a Barron’s article (http://ce.seekingalpha.com/article/13672), Apple’s PC market share has no where to go except up.
The iPod provides half of the $17.3 billion annual revenue. The gadgets lure new customers to the Apple computer segment. The primary ‘chip’ barrier has been partially removed. With the introduction of an expanded Intel chip based product line, Apple might be able to increase its computer sales beyond our current estimates. Leave it to Jobs to figure out the right hardware/price combination. Needless to say, never underestimate Job’s gimmicky marketing capabilities.
Don’t worry too much about Zune. People love Apple especially the younger first time computer buyers. Microsoft has an image problem to deal with before succeeding with the end consumer. Selling to PC manufacturers is a totally different ball game than selling to a computer geek that cringes every time your name is mentioned. Anyone at MSFT reading this…?
Disclosure: This comment was written by a CrossProfit analyst and does reflect the official opinion of CrossProfit.com.
Posted by: CrossProfit at August 7, 2006 05:35 PM