Short Term Pains for Apple
First off, I think Apple is a great company. It's been a phenomenal turnaround story but in the short term, I think Apple will be in for a very bumpy ride. I will attempt to explain why.
As you might have noticed, Apple got punished this past tuesday (-5.45%) and especially after-hours (-3.57%) despite all the product announcements from Steve Job's keynote at MacWorld. In past MacWorld events, it would generate a nice intraday pop for the Apple stock. Read on and you'll find out why this didn't happen this time around.
First a little primer. A long time ago, I dated a girl for a short time who said and did some of the dumbest things you could imagine (not quite the calibre of Britney Spears, Paris Hilton or Lindsay Lohan, but still up there). She had this "what can you do for me right now (or in the future)" way about her which I think is pretty stupid socially, but when you're looking at stocks,strangely enough her way of thinking has great merit. With that established, let's look at Apple:
1. "What Can You Do For Me Now:
First, the overall market is in the dumps like someone's bad taco -- everyone knows this. What I think the market was looking for from Apple was something new (potential new market) and exciting (potential for high growth) -- maybe help rally the tech sector. Apple announced 'new' products like their upgraded TV product, a slimmer notebook. One problem: if you think about it, there's nothing new or innovative here. They just took an existing product, put a shiny, slimmer bow on it and called it a new product. Not that I don't think they will be great products, they most definitely will -- Apple always comes through there -- there's just nothing super duper new, exciting or innovative there. Sorry Apple. Kind of a disappointing Keynote from a product point of view.
2. What Can You Do For Me In the Future:
Wall Street thrives on rumors and corrects on facts. If you think about it, we already know what Apple's revenue story is going to be in the 2008, it's the estimated growth of the laptop and TV market. Ipod and iTunes service will continue to be a strong product for Apple, but I don't think any of these products announced today will 'surge' Apple's revenue. So there will be steady growth, but no huge surges (with the exception of earnings on Tuesday) in the future.
3. Bonus: What CAN'T You Do For Me in the Future:
As a corollary to the second point, what these products can't really do for is generate huge earnings. There's a perceived threat that we're going into a recession, and generally when that happens people go into lock-down mode, spend less and for the most part and only buy stuff that they think they need as opposed to want. That is they tend not to buy luxury items (stuff they can live without) and spend on necessities (stuff they can't live without like soap, toothpaste, diapers, Internet <-- no joke). Fancy TV device? Well we already have one, or we're satisfied with our current TV solution. Slimmer laptop? Well we already have one, it's already pretty slim. Touch screen phone/music player device? Well I've never seen that before yeah I 'need that'.
So let's look at the clear facts:
* Apple didn't create any upward momentum today that will carry into earnings (now)
* The 2008 revenue story is somewhat known with limited potential for explosive growth (future).
* The economy is potentially heading into a recession (risk to everyone's earnings)
* Apple is already up some ungodly percentage and you're already sitting on massive profits
No doubt that Apple will crush their numbers and with a good growth story pop after Tuesday's earnings reports. But with recession worries looming and without an exciting growth story I don't think that pop will be able to grow significantly or be sustained in the short term.
As you might have noticed, Apple got punished this past tuesday (-5.45%) and especially after-hours (-3.57%) despite all the product announcements from Steve Job's keynote at MacWorld. In past MacWorld events, it would generate a nice intraday pop for the Apple stock. Read on and you'll find out why this didn't happen this time around.
First a little primer. A long time ago, I dated a girl for a short time who said and did some of the dumbest things you could imagine (not quite the calibre of Britney Spears, Paris Hilton or Lindsay Lohan, but still up there). She had this "what can you do for me right now (or in the future)" way about her which I think is pretty stupid socially, but when you're looking at stocks,strangely enough her way of thinking has great merit. With that established, let's look at Apple:
1. "What Can You Do For Me Now:
First, the overall market is in the dumps like someone's bad taco -- everyone knows this. What I think the market was looking for from Apple was something new (potential new market) and exciting (potential for high growth) -- maybe help rally the tech sector. Apple announced 'new' products like their upgraded TV product, a slimmer notebook. One problem: if you think about it, there's nothing new or innovative here. They just took an existing product, put a shiny, slimmer bow on it and called it a new product. Not that I don't think they will be great products, they most definitely will -- Apple always comes through there -- there's just nothing super duper new, exciting or innovative there. Sorry Apple. Kind of a disappointing Keynote from a product point of view.
2. What Can You Do For Me In the Future:
Wall Street thrives on rumors and corrects on facts. If you think about it, we already know what Apple's revenue story is going to be in the 2008, it's the estimated growth of the laptop and TV market. Ipod and iTunes service will continue to be a strong product for Apple, but I don't think any of these products announced today will 'surge' Apple's revenue. So there will be steady growth, but no huge surges (with the exception of earnings on Tuesday) in the future.
3. Bonus: What CAN'T You Do For Me in the Future:
As a corollary to the second point, what these products can't really do for is generate huge earnings. There's a perceived threat that we're going into a recession, and generally when that happens people go into lock-down mode, spend less and for the most part and only buy stuff that they think they need as opposed to want. That is they tend not to buy luxury items (stuff they can live without) and spend on necessities (stuff they can't live without like soap, toothpaste, diapers, Internet <-- no joke). Fancy TV device? Well we already have one, or we're satisfied with our current TV solution. Slimmer laptop? Well we already have one, it's already pretty slim. Touch screen phone/music player device? Well I've never seen that before yeah I 'need that'.
So let's look at the clear facts:
* Apple didn't create any upward momentum today that will carry into earnings (now)
* The 2008 revenue story is somewhat known with limited potential for explosive growth (future).
* The economy is potentially heading into a recession (risk to everyone's earnings)
* Apple is already up some ungodly percentage and you're already sitting on massive profits
No doubt that Apple will crush their numbers and with a good growth story pop after Tuesday's earnings reports. But with recession worries looming and without an exciting growth story I don't think that pop will be able to grow significantly or be sustained in the short term.
Comments
2) Big companies don't surge in growth man, especially companies as big as apple.
3) Apple's target audience isn't going to stop buying their products even if we do go into recession. More than 80% of the people that I know who own apple products don't even know what a recession or depression is. And even if we are heading in that direction, it won't effect their buying habits. University studies still need laptops, and highschool kids still want hi tech gizmos.
The dow, nasdaq, and s&p have been losing consistently for the past 2 weeks now. How did you expect 1 company, out over 3200 companies in the nasdaq, to bring up markets?
Point 2 - What? have you seen apples 5 year growth chart? - look at the stock chart and tell me that is not a HUGE upwards move by Apple.
Point 3 - I agree to some extent .. The kids may not know the markets collapsed but their parents that pay their bills do.. but some children will get what they want so yea Q1 earnings will be lower.
2) A surge is an unexpected jump. ie, iphone keynote surged aapl 7% on that one day. Apple has been growing steadily over the past 5 years, it hasn't been on a 5 year surge.
3) what nation do you live in man? I can walk down the streets where i live, knock on every door and ask everyone in every house. the MAJORITY has no idea of the effects of a recession, or better yet, a market correction. Even if they did, it wouldn't effect their income. Bob, Joe, and Steve all work on annual salaries and whether the markets up or down, they still get paid the same and still spend the same. Market corrections effect an overall economy, but the truth is, most people don't even notice an effect.