Friday, June 4, 2010

Apple: Doing Great, But Facing Market Headwinds


The short story: AAPL was down 92 cents for the week.  The long story is... AAPL is down -0.36% for the week, down -0.36% for the month, up +21.46% for the year, and up an amazing +207.98% since the March 9, 2009 market bottom. This equates to -$0.92 for the week, -$0.92 for the month, +$45.23 for the year, and an incredible +$172.85 since the March 9, 2009 market bottom! In addition, Apple is down -5.49% or -$14.87 from the 2010 YTD, and all-time, high, of 270.83 on April 23.  By comparison, the overall market, the S&P 500, is down -2.25% for the week, down -2.25% for the month, down -4.50% for the year, up +57.40% since the March 9, 2009 market bottom, and down -12.52% from the 2010 YTD high on April 23.  AAPL has held up better than the overall market downdraft due primarily to the European Crisis & disappointing USA May jobs report.

Apple Daily Chart
Below is the AAPL daily chart for 2010.  A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart below:
Current Close 255.96 (Higher yellow horizontal line)
2010 YTD & All Time High 4-23-10 270.83
YE 12-31-09 210.73
10 Month EMA 220.68 (Lower yellow horizontal line)

AAPL: Facing Market Headwinds

Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a buy/long/bull signal on Friday, March 12, 2010, which remains intact. Therefore, AAPL is in an intermediate-term bull market and has remained so during the recent market pullback and related Flash Crash. That is, the 25d sma is higher than the 50d sma.

The current closing price, the higher yellow horizontal line is below the 2010 YTD and all time closing high of 270.83 on April 23.  AAPL is just below the price range of April 21 and 22, before the push to the 2010 YTD and all-time high.  Apple is also just above the lower yellow downtrend line and above the higher yellow downtrend line, both of which are discussed below.  The only resistance above is recent, up to and including the 2010 YTD and all-time closing high of 270.83 on April 23.

The most recent support, probably minor, is just below at the May 14 and 17 closings at about 254.00.  There are multiple levels of support below this, including the April 15 close and peak of 248.92.

Moving Averages
The ongoing EU and Euro Crisis has also pulled down high beta technology sector stocks.  AAPL is still above the 25 day and 50 day simple moving averages.  Even through this recent market turmoil and Flash Crash, AAPL has also remained above the 100d sma and 200d sma's.  By comparison, the S&P 500, SPX, is below the 25d, 50d, 100d, and 200d sma's.  The 25d sma is descending, peaking on May 19, while the 50d, 100d, and 200d sma's are still ascending.

Uptrend Line
The yellow uptrend line, a rate of price ascent, is from the January 20, 2009 closing low of 78.20 up through the February 4, 2010 closing low of 192.05. The February 4 closing low has been the bottom for 2010.  AAPL spiked decisively above this uptrend line on February 24. AAPL has now stayed well above henceforth (except for Flash Crash Thursday, May 6, 2010).

Higher Downtrend Line
The higher downtrend line, a rate of price descent, is from the April 23, 2010 YTD and all time high of 270.83 down through the recent peak on June 2, 2010 of 263.95. AAPL has been below this downtrend line since.

Lower Downtrend Line
The lower downtrend line, a rate of price descent, is from the April 23, 2010 YTD and all time high of 270.83 down through the April 29, 2010 peak of 268.64. AAPL rose above this downtrend line on Friday, May 28, this was the first time since May 13 the line had been reached.

Relative Strength Index (RSI)
RSI 14 day = 51.90 is reasonable, above the May 21 recent low of 36.10, below the recent May 27 high of 62.10
RSI 28 day = 45.46 is reasonable; above the May 20 recent low of 48.47, below the recent May 28 high of 53.80
The RSIs are both reasonable and signalling plenty of upside room.

MACD (12,26,9)
The MACD flipped to bullish on June 1, after being bearish since May 4,  as the pullback, Flash Crash, and EU & Euro Crisis pulled the related ema's down.

Long-Term Trend
The lower horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. AAPL is well above this signal at the current close, the higher yellow horizontal line. Therefore, AAPL is in a long-term bull market and has been since April 2009.

Through the disappointing USA May jobs report, recent pullback, Flash Crash, and EU & Euro Crisis, the fundamentals at Apple Inc. never changed and actually are improving.  Apple Inc. is doing great!  AAPL is struggling with the overall market downdraft.  Apple has been charging ahead with the introduction of the iPad, iPad 3G, a new iPhone OS 4, a new mobile advertising platform (iAd), a new iPhone 4G to be launched in June, overall strong iPhone sales and market share, and now reports of very strong iPad demand (including the international launch in May). The current price is low based on AAPL fundamentals.  The RSI 14 day and 28 day are reasonable.  The MACD is now bullish.  The intermediate-term trend became bullish on Friday, March 12 and remains so. The long-term trend remains bullish.

We are long AAPL.

Apple News & Fundamentals

Worldwide Developers Conference 2010
Starts Monday, June 7 and continues through Friday, June 11.  CEO Steve Jobs speaks Monday and is expected to announce the iPhone 4G.  Conference website is here.

Market Capitalization
Apple Inc. achieved a milestone the week of May 24, 2010, passing Microsoft in market capitalization to become the largest technology company, and second overall largest company, in the USA.  AAPL's market cap is now $232.91 billion, compared to Microsoft's of $226.02 billion.  Exxon leads with $279.65 billion.  Microsoft still leads Apple in total net profits.

Apple announced on May 31 that 2 million iPads had been sold in less than 60 days.  Analysts stated the week of May 31 the iPad was sold out at many USA Apple stores.  The iPad is now outselling Macs.  The international launch was May 28 in 9 countries and the frenzy ensued.  Apple launched the iPad in the USA, the Big Day, on Saturday, April 3.  Reviews of the iPad have been favorable overall with 91% consumer satisfaction, and 1 in 5 USA consumers plan on buying an iPad.  The App Store keeps adding iPad apps and the iBook store the same. Estimated 2010 sales of iPad now range from 6 million units to 10+ million units and it now appears the high side, or even higher, unit sales estimates are valid. It has been suggested that iPad sales might cut into iPhone sales some, but I don't believe this will have a material effect.  However, recent data suggests the higher margin iPad is cutting into lower margin iPod sales.  So far, no one has come out with a "second tablet" to compete with the iPad, although there is a Chinese knockoff, a European competitor, and the Dell Streak will launched soon.

The iPhone 4G will most likely be launched on Monday, June 7 by Steve Jobs at the Apple Worldwide Developers Conference. The iPhone OS 4 was announced on Thursday, April 8 by CEO Steve Jobs. iPhone continues incredible sales and market share. The Q1 results for iPhone were outstanding and pump the profits into Apple Inc. Apple's share of global mobile Web browsing is at 67% from the iPhone and iPod Touch.  Business customers are now 40% of iPhone sales per AT&T, which indicates AAPL is cutting into RIM Blackberry market share.  The iPhone is now beginning to dominate the Japanese smartphone market.

It's all about the apps for iPhone and iPad.  Actually, it's all about mobile computing and Apple is right on the leading edge with the App Store.  There are now countless apps for the iPhone (200,000+ and counting?) and an ever increasing number for iPad, plus the iBook store.

CEO Steve Jobs introduced the new personalized, mobile advertising system, iAd on April 8. This will compete directly, and replace, Google's advertising platform. I personally think this was a bigger announcement than the iPhone OS 4, that is, Apple is going inito the mobile advertising business. While iPad and iPhone sales will positively impact Q2 earnings, the iAd platform may well have a significant impact in future quarters as this revenue stream comes online.

E Retailing
ComScore reported the week of May 24 that Apple was the second most visited e retailer in the USA, behind #1 Amazon.  Wal Mart, Target, and Netflix are #3, #4, #5.

Smartphone Wars
It seems everyone is suing everyone else now over smartphone patents!  Mobile computing  is  the future and smartphone sales are surging worldwide.  The stakes are high and the lawsuits, to hopefully at least obtain royalties, should continue indefinitely.  HTC, maker of Google Android phones, counter sued Apple this past week over patents.

Here's an good review of Apple entering internet search, even as CEO Steve Jobs denies it. The article, "Of Course Apple Is Going To Do Search", can be read here.  Google announced the week of May 31 that the App Store apps are now included in Google search.

CNBC: American Titans
CNBC has done a feature on Apple Inc., "Gadgets Galore", the week of May 10 in their American Titans series.  Click here for the commentary and analysis in this feature.

Quarterly Earnings & Analysts' Estimates
Q1 earnings were released on April 20 and AAPL beat on revenues, EPS, and outlook.  Numerous analysts raised price targets to $300+ within 48 hours.  With the Apple announcement on May 31 that 2 million iPads had been sold, the analysts again revised the iPad sales estimates and AAPL price targets.  Recent analysts' ratings and targets here and here.  Q2 will include all iPad sales year to date and should be another stellar quarter.  More than 50% of Apples sales are outside the USA.

AAPL Monthly Chart

Below is the monthly AAPL chart since January 2006.  The overall analysis and commentary are the same as for the daily chart above.  The yellow horizontal lines are the same, and as described, on the daily chart above.  The yellow uptrend line is also the same, and as described, on the daily chart above.


No comments:

Post a Comment

Seeking Alpha