Saturday, October 22, 2011

Apple Drops on Earnings Stumble! (Chart, News) *Closes below 20-day average* AAPL


● AAPL 


Apple CEO Tim Cook is off to a tough start with Apple's latest financial results viewed as disappointing
However, Apple guidance for calendar Q4 is record-breaking and off the charts 


APPLE OVERVIEW

Apple Inc. Apple closed at $392.87 on Friday, October 21, 2011. AAPL was down -6.90% for the week, is up +3.03% for October and the quarter to-date, is up +21.80% for 2011, and is up +372.71% from the market cyclical low on March 9, 2009. AAPL set an all-time closing high of $422.24 on October 18, 2011 and is -6.96% below this peak.

Benchmark $378.25 Apple closed at $378.25 on October 5, before the announcement that Co-Founder and Chairman of the Board Steve Jobs died. This begins the Post-Steve Jobs Era and is the benchmark price to determine buyer conviction and confidence in AAPL now that Steve Jobs is no longer with us. Previously, we had monitored the August 23, 2011 close of $376.18 before Steve Jobs resigned as CEO. Prior to that, we had monitored the then all-time closing high of $348.48 on January 14, 2011 before Steve Jobs took a medical leave of absence. Both of those previous prices are still significant as there was considerable price interaction afterwards.

Apple Fundamentals Apple reported calendar Q3 2011 financial results on Tuesday, October 18 and are reviewed here: Apple Earnings Stumble on Drop in iPhone Sales (Charts, Video) *Revenues, net income, EPS down*. These financial results are reviewed and analyzed on this blog.. Current Apple financial  data, charts, and review is at the Apple Financial Performance page, updated for the latest calendar Q3 2011 results reported on October 18. A review and analysis of the Q2 2011 earnings call has been posted at the Apple Earnings Conference Call page, which will be updated soon for Q3. Our updated valuation and target price of AAPL stock is posted at the Apple Stock Valuation page. International sales accounted for 63% of Q3 2011 revenues, up from 62% of Q2 2011 revenues, 59% in Q1 2011, 62% in Q4 2010, and 52% in Q3 2010.


APPLE DAILY CHART

Apple Daily Chart Below is the AAPL daily chart since the June 20, 2011 closing low to illustrate recent price interactions.

Noteworthy Closing Prices
Current Close: $392.87
2011 and All-Time High: October 18 $422.24
2011 Low: June 20 $315.32
2010 High: December 28 $325.47
2010 Low: February 4 $192.05
YE December 31, 2010: $322.56
YE December 31, 2009: $210.73
Cyclical Low: January 20, 2009 $78.20



Apple Chart Review
Intermediate Term Trend descending 25d avg > ascending 50d avg since 7-18-11, AAPL in between, tenuously bullish
Long Term Trend AAPL > ascending 10 month ema = 359, overall bullish since April 2009, bullish
Key Resistance 20d avg 395, peak 413, peak 403
Key Support peak 390, 50d avg 389, peak 384
Moving Averages below 20d, above 50d, 100d, 200d, 400d avgs
Uptrend Line above since 10-10-11; line from 1-20-09 closing low 78.20 up thru 2-4-10 close 192.05
Downtrend Line none significant
RSI 14 Day = 58.94 is reasonable, ascending
RSI 28 Day = 52.36 is reasonable, descending
MACD (12,26,9) = -0.07, descending
Volume average 22.2M latest day, 50 day avg = 21.9M
Price Earnings Ratio (ttm) lower 14.20, historically in low 20s


APPLE SUMMARY

Conclusion Apple earnings stumbled for calendar Q3, reported October 18, and AAPL is down -6.96% subsequently. This was after closing at an all-time high of $422.24 on October 18. CEO Tim Cook and CFO Peter Oppenheimer attributed this to a significant decline in iPhone sales in the latter part of the quarter as consumers waited in anticipation of the new iPhone 4S launched in early October (the next quarter). Holiday Q4 is the annual cyclical peak for Apple and with the introduction of the iPhone 4S in the same quarter, a huge rebound in iPhone sales is projected. CFO Oppenheimer is projecting next quarter (Holiday Q4) revenues at $37 billion and earning per share of $9.30. The fundamentals of Apple continue extraordinary. Total assets are $116.37 billion. Current and noncurrent cash and investment reserves are an unbelievable $81.57 billion. The remainder of 2011 appears positive for Apple and we have been forecasting Holiday Q4 quarterly total revenues to reach $30 billion. Now Apple has topped us by $7 billion!. Our AAPL target price short-term is $475 through the next earnings announcement in January 2012. The intermediate-term trend indicator is now tenuously bullish and the long-term trend continues bullish.

Disclosure We are long AAPL.

Apple News A summary of recent news & announcements; others are posted on this blog
● Apple earnings stumbled on a drop in iPhone sales for the calendar Q3 2011. However, the outlook for Holiday Q4 is record-breaking and beyond.
● The iPhone 4S went on sale October 14 in the U.S., U.K., Canada, Australia, France, Germany, and Japan with throngs of eager customers lined up.
● Pre-orders of the iPhone 4S sold out and topped 1 million on the first day. This exceeded both Apple's expectations and sales of earlier models.
● Apple was named the top global brand, surpassing Coca-Cola, by the European Brand Institute.
● Co-Founder, Chairman of the Board, and Legend Steve Jobs died October 5, 2011.
● Apple launched the iPhone 4S and refreshed iPods plus reviewed services at the "Let's Talk iPhone" media event on October 4.
● Apple opened its first Hong Kong store on September 24, which should benefit from the surge in demand for Apple products in China.
● iPhone 4 sales are estimated as "surprisingly robust" by analyst Shaw Wu of Sterne Agee, considering the iPhone 5 was expected to be launched. Unit sales estimates were raised from 15.7 million to 18.5 million and other analysts have raised estimates. However, Mac sales may be weaker than projected.
● Apple topped Exxon as #1 in USA market capitalization at the close of the week ended August 26, 2011. See commentary further below.
● Steve Jobs resigned as CEO on August 24, 2011. Tim Cook is CEO.
● The WSJ reported Sprint would be selling the iPhone 5 [iPhone 4S] beginning in mid-October, along with AT&T and Verizon.
● The iPad 3 is rumored to be in testing and component manufacturers are being readied for an early 2012 launch per a Wall Street Journal report.
● Apple's market capitalization was near or matched the 32 largest Eurozone banks - in total! - during the week ended August 19, 2011.
● Apple passed Nokia as #1 in smartphone sales in Q2 2011, with 18.5% of all shipments worldwide.
● Apple has more cash than the U.S. Treasury in late July 2011. Apple's cash, cash equivalents, and marketable securities of $76.2 billion exceeded the U.S. Treasury cash on hand of $73.8 billion.
● Fake Apple Stores in China: If imitation is the highest form of flattery, the fake Apple stores in China are the ultimate in illegal replication. These stores imitate the complete Apple store experience and attempt to be an exact reproduction including the employees and their badges and uniforms!
● The new MacBook Air was launched and the OS X Lion became available the week ended July 22.
● Hyper Apple: Ticonderoga Securities analyst Brian White on July 12, 2011 raised his estimates for Apple (AAPL) based on rising iPhone and iPad projections, while reiterating a Buy rating and a $612 price target on the stock, and throwing some language the stock’s way that’s akin to a big tent revival: "we believe Apple is a beacon of hope in an increasingly concerning world".
● Apple held the annual Worldwide Developers Conference (WWDC) June 6-10 with CEO Steve Jobs presenting the keynote speech and introducing iCloud. Also previewed were Mac OS X Lion and iOS 5.
● An explosion at a Foxconn plant on May 20 in Chengdu, China which produces the iPad 2 created uncertainty over manufacturing disruption. There already has been concern the demand for iPad 2 is much greater than Apple's production abilities. Cirrus Logic earlier reported production problems with an audio device and 50% of its business is supplying components to Apple. Components of the iPad 2 (at least five) from Japanese suppliers may be delayed due to the March earthquake.

Apple Data AAPL's market capitalization is #2 worldwide at $364.23 billion, compared to #1 Exxon at $394.73 billion. Microsoft is #4 at $229.03 billion and IBM is #7 at $216.92 billion. Apple Inc. first surpassed Exxon as #1 in USA and worldwide market capitalization for the week ended August 26, 2011. AAPL achieved a milestone the week of January 7, 2011 when total market capitalization surpassed $300 billion. Previously, the week of May 24, 2010, Apple surpassed Microsoft in market capitalization to become the largest technology company, and second overall largest company. Apple reported calendar Q3 2011 total revenues of $28.27 billion and net income of $6.62 billion. Microsoft reported calendar Q3 2011 total revenues of $17.37 billion and net income of $5.74 billion. Microsoft continues to have higher gross and  operating margins and now has surpassed on net margin for the latest quarter. Current Apple financial  data is at the Apple Financial Performance page. Current Microsoft financial data is at the Microsoft Financial Performance page. Apple is now 14.18% of the NASDAQ 100 index, as measured by the PowerShares QQQ ETF portfolio holdings, weighted by market capitalization, but rebalanced effective May 2, 2011. AAPL is one of the most traded stocks in the USA. Per the SEC Form 10-K, Apple had 46,600 full-time employees and 2,800 temporary full-time employees and contractors as of September 25, 2010. Apple is compared to other large technology companies here [Largest USA Tech Companies: Financial Performance & Position Review].

Apple's Mission Statement and as described in press releases, "Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced iPad 2 which is defining the future of mobile media and computing devices."

About Tim Cook Tim Cook is the CEO of Apple and serves on its Board of Directors. Before being named CEO in August 2011, Tim was Apple's Chief Operating Officer and was responsible for all of the company’s worldwide sales and operations, including end-to-end management of Apple’s supply chain, sales activities, and service and support in all markets and countries. He also headed Apple’s Macintosh division and played a key role in the continued development of strategic reseller and supplier relationships, ensuring flexibility in response to an increasingly demanding marketplace. Prior to joining Apple, Tim was vice president of Corporate Materials for Compaq and was responsible for procuring and managing all of Compaq’s product inventory. Previous to his work at Compaq, Tim was the chief operating officer of the Reseller Division at Intelligent Electronics. Tim also spent 12 years with IBM, most recently as director of North American Fulfillment where he led manufacturing and distribution functions for IBM’s Personal Computer Company in North and Latin America. Tim earned an M.B.A. from Duke University, where he was a Fuqua Scholar, and a Bachelor of Science degree in Industrial Engineering from Auburn University.


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