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Let Hype Take A Bite Out Of Apple Shares Before You Buy
Ryan Cole, Investment U Research
Wednesday, January 13, 2010
I hate to disagree with my colleague, Dave Fessler, especially when I agree with several of the points he made in his latest article, but steering clear of Apple Inc. (Nasdaq: AAPL) seems like the safe thing to do right now.
Don’t get me wrong: I think Apple is a great company. And unlike my fellow columnist, Tony Daltorio, I don’t foresee iPod, iPhone or App Store competitors stealing any significant business from them anytime soon. Apple’s innovative track record shows clearly how well the company stays ahead of the game.
I don’t even see any further economic angst affecting the company. Its products appear surprisingly and admirably recession-proof so far, and there’s no indication that trend won’t continue.
But even with a solid history of innovation and no signs of slowing down, I don’t think even Apple can live up to the hype surrounding it right now… at least not in the short term.
The reason? Apple – probably – has a new product coming out and everyone’s already drunk the kool-aid.
Product? What Product?
When in doubt, look backwards.
Three years ago, when Apple announced its upcoming iPhone, the stock bounced upwards before quickly falling back down. Shares didn’t really start climbing until June 2007, after consumers had time to get acquainted with the device.
Similarly, I don’t see the stock sustaining these prices for too much longer, especially considering that not only has the stock already raced ahead before Apple made any announcements – hitting all-time highs practically every day – but nobody even knows anything about the product in the first place.
Originally called the iTablet and now known as the iSlate, the new device could be just about anything. Engadget, a respected tech blog, recently summed up the rumors nicely when it impishly speculated: “Apple Tablet rumors evolve into zen koan: It’s a big iPhone, but it’s not a big iPhone.’”
And really, it could be anything with any properties… a multimedia device or an Apple netbook… with or without a connection to Verizon’s upcoming 4G network… and free to work on any mobile network or none at all.
It’s all one big mystery… much like its very existence, considering that technically, Apple never even said it had a tablet coming at all. And in keeping with tradition, the tech maven won’t respond to rumors, though some company employees seem to have launched a counter-intelligence campaign, “privately” disputing that the company has any pending devices whatsoever.
Likewise, while it has booked “corporate events” at the Yerba Buena Center for the Arts before to make big announcements – and the YBCA already announced a “corporate event” on January 26 – Apple hasn’t actually confirmed the conference.
For all anybody knows, it really doesn’t have a product.
Long-Term Possibilities, Short-Term Tank
Of course, the evidence gathered by reputable journalists indicates strongly that some kind of tablet exists. But like everybody else, they can’t nail down an actual release date, and they postulated that Apple delayed the announcement at least once already.
Yet even if the company does come forward on January 26th like everybody expects, the product might not match the intense amount of hype already generated, disappointing shareholders and prompting the stock to fall hard.
And in the best scenario, where everything goes according to rumor, Steve Jobs reveals some amazing, new must-have and everybody leaves happy, the product won’t generate any actual sales for at least two months, six months… or even longer, causing shareholders to sell on the news anyway as reality sets in.
Now make no mistake: I think very highly of Apple and I strongly believe that people will want whatever device they do finally come out with.
But right now, the stock is quite simply overpriced and in line for a fall, or at the very least, a stagnant period.
After all, you can’t read a financial journal or newspaper without seeing some story about Apple, and Investment U has covered the tech company three times in less than two weeks. Whatever investors wanted to get in, have almost assuredly gotten in.
Best to wait on the actual news, let the stock price ease and buy between the announcement and the release. And if you’re feeling especially frisky, you could even buy some February puts.
But one way or the other, don’t bet big on shares going up… for now.
Good Investing,
Ryan Cole
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3 Responses to “Let Hype Take A Bite Out Of Apple Shares Before You Buy”
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January 13th, 2010 at 3:53 pm
If I had a nickel for every expert who warned investors about Apple I’d be richer than Steve and his execs put together. A kid with grade school math skills could even understand the most popular comparison:
Microsoft. MSFT -48% from Dec 1999, AAPL +710%.
Today Microsoft $30, Apple $210
Any questions?
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January 13th, 2010 at 8:41 pm
You really need to consider the basics on apple … earnings and forward P/E. based on this the shares are quite simply undervalued. any new products announced are icing on the cake as they are not yet baked into any analyst projections. does this mean shares are going up short-term? who knows, but medium to long term it’s a safe bet.
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January 14th, 2010 at 8:49 am
“But right now, the stock is quite simply overpriced and in line for a fall, or at the very least, a stagnant period.”
That’s your whole analysis? No mention of earnings and a forward P/E of about 15?
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