Michael Olivero
The official blog of Michael Olivero, Software Architect & Humble Entrepreneur

Is Apple another bargain when the stock opens 6% lower from the previous close?

Wednesday, 19 October 2011 00:05 by Michael Olivero

Imagine if Microsoft, a similarly comparable large company like Apple, would all of a sudden gain 54% in profit. Would its stock tank 5 or 6% because they didn't sell as many licenses of Windows as economists had projected?  No, on the contrary it will rise like 10% on such profound news for typically lethargically large companies of their size.  The funny thing, this is not a one time event, this is a continual event every quarter for sometime now and will continue for a few more as the world settles into the iPad as they did with the iPhone and of course the App Store, the only place you can legitimately buy apps for it, will continue growing too.   The 4th quarter is going to be that much more of a smashing success with iPhone projections as the 3rd quarter wasn't because the sales of iPhones, which dropped in 3rd quarter due to lack of product launch in June, will fall over to 4th quarter from the iPhone 4S product launch.  So of course, when comparing Q3 2011 to Q3 2010, there is inevitably going to be some differences -- especially with the successful iPhone4 being the growth factor then.

To blatantly compare Q3 2011 with Q4 2010 in gross iPhone sales and fuss over the unsatisfied expectations has got to be the most misconstrued news I have ever heard.  This only reinforces Peter Lynch investment style of investing in what you know and you'll beat the analysts every time.  No matter which way you slice it, AAPL has 81 billion in the bank accruing at 6.5 billion per quarter, no debt, 54% increase in profit and product portfolios which are no where near becoming stagnant.  New product revenue lines like App Store, iPad, & strongly increasing revenue from existing product lines like iPhone, MacBook, iTunes (#1 digital music store) -- it's a 100% no brainer this stock will continue to push upwards for the near future.  Any drop should be considered a discounted buying opportunity.  

Oh, and this is before the announcement of their touch based iMacs which will lay slightly inclined on your desk similar to the iPad, still with a slide out keyboard for keyboard dependent apps , and any other new upcoming product line.

I'll write again when the price is at 500 and I'll reassess the situation then to see if we can expect more.  Buying now will give you roughly a 25% return from 400 to 500 within 12 months.

 

 

UPDATE 11/28/2011

Apple Stock today closed at 376.12.  It's an extreme bargain.  I just read various articles which simply justify my gut feeling.  One reported iPhone4S sales so large in Britain, it became the #1 in sales, even beating Andriod -- a feat many people thought was impossible given the diversity of Android devices at various price points.  Another article, states teens have listed iPhone & iPad with the same level of desire as cash and clothes on their holiday wish lists.  Yet, another, from a financial perspective, compares Apple stellar performance in comparison to it's current stock price.  Every financial metric used to value the stock have it as extremely undervalued.  Anyone buying at today's price will reap an easy 30% gain on the way up to 500.  Lets just hope the financial crisis doesn't bring a general recession/depression -- the only thing which could drag down the stock.