Why betting against Apple will backfire

Apple Store“Apple Inc. (AAPL) hit another new 52-week high today as it traded above $110 earlier this morning. According to historical price data, Apple has actually been hitting a new 52-week high each day for the previous nine trading sessions. Does this mean Apple is overvalued, technically overbought and shortable? Maybe in the short run it might be due for a profit taking fall, possibly testing the century mark, but it is difficult to believe that any downturn would be more than short term,” Thomas writes for Ant & Sons.

“It is almost like shorting Google Inc. for a few days hoping to catch a few points. In the short term you might make out fine, but in the long run, you never want to bet against a company that continues to dominate and increase its market share in the search area while launching new products virtually every day. As “old fashioned” as it might sound, a buy and hold strategy works well for such growth companies,” Thomas writes. “The same can be said for Apple.”

Full article here.

[Thanks to MacDailyNews Reader “digirati” for the heads up.]

21 Comments

  1. With AAPL as with all other stocks the price reflects future expectations of growth.

    At $110, there’s an assumption in place that Apple will increase revenue by a factor of about five times, all other things being equal.

    So when looking at a stock you can’t say, it’s $110, but the price will be so much higher when Apple’s revenues increase massively the future. It won’t. That growth has already been taken into account in the $110 price.

    So for the price to increase a lot, investors have to not only see all the growth that they’re expecting and then even more again.

    What you can be sure of is if all that expected growth doesn’t materialize, say Mac sales remain flat, and iPod sales don’t appreciably increase, and the iPhone is less successful than expected, the price will plunge. Remember today’s scenario calls for 5x growth just to justify the current price.

  2. AAPL

    pricedin is the very reason I am doing so well

    last year apple made zero on

    iphone
    apple tv

    his math should be explained because 5 x stupid is as stupid blogs

    the story is

    Apple is kicking new market ass

    If iphone fails it will still add a rev spike for the 2 years

    iphone will not fail, let me say that agin! IPHONE WILL NOT FAIL

    I am getting 2

  3. “Forget technical analysis. I believe investor sentiment is the most important indicator of a stock’s direction.”

    Who’s talking technical analysis? Those numbers are based on the fundamentals.

    And your approach could best be described as the lemming approach to investing.

    In the short term investor sentiment may drive the price, but over the long term the fundamentals always drive the price.

    “his math should be explained because 5 x stupid is as stupid blogs”

    I could try to explain, but you would be incapable of understanding, and wouldn’t believe me anyway. That is to say, if you don’t know already know the basics of how to derive that result yourself, you have a lot of learning to go before what I would show would convince you.

    “iphone will not fail, let me say that agin! IPHONE WILL NOT FAIL”

    It doesn’t have to fail for Apple to have a problem. It just needs to not result in a 5x increase in Apple’s revenues. That is to say, the price already reflects an expectation that the iPhone will be hugely, knock the ball out of the park successful. Things would go badly for the share price if it were just merely very successful.

  4. Pricedin,

    I’ll bet the wide screen iPod, that surfs the net over WiFi and uses Skype, has not been factored in.

    I’ll bet the plain jane iPhone, that is free with a 2 year subscription, has not been factored in.

    I’ll bet that the soon to be successful movie subscription service from Apple has not been factored in.

    I’ll bet the big increase in DRM free music sales has not been factored in.

    I’ll bet that Jobs’ one more thing out of the blue that wows everyone all over again has not been factored in.

    I’ll bet a computer market share north of 15% has not been factored in.

    Apple is on a roll and most of us know it even if you don’t.

    Put your money where your mouth is and short Apple stock.

  5. “I’ll bet a computer market share north of 15% has not been factored in.”

    Well I bet you’re the only person who has ever thought of these things. Apple stock will go through the roof now that you’ve let that out.

    To get 5x the revenue, Apple would have to sell 5x as many iPods and 5x as many Macs or some other mix of devices. That would be iPods for every adult in America each year, and ~25% of the American computer market. Do you really think people really haven’t factored in that Apple will need to do products in the future that are different to the ones it does today to reach the lofty growth that the current prices requires?

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