Saturday, November 12, 2011

Apple Drops Below 50-Day Average (Chart, News) *Concerns of decrease in iPhone & iPad sales* AAPL


There were unconfirmed rumors that iPhone sales may not meet expectations this quarter


Apple Inc. Apple closed at $384.62 on Friday, November 11, 2011. AAPL was down -3.90% for the week, is down -4.98% for November, is up +0.87% this quarter, is up +19.24% for 2011, and is up +362.78% 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 -8.91% 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 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 Q3 2011 earnings call has been posted at the Apple Earnings Conference Call page. 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 Below is the AAPL daily chart since the June 20, 2011 closing low to illustrate recent price interactions.

Noteworthy Closing Prices
Current Close: $384.62
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 ascending 25d avg > level 50d avg since 7-18-11, AAPL < both, tenuously bullish
Long Term Trend AAPL > ascending 10 month ema = 365, overall bullish since April 2009, bullish
Key Resistance peak 390, 50d avg 395, benchmark 400, 20d avg 401, 405-406
Key Support at support, peaks 384, 100d avg 383, benchmark 378
Moving Averages below 20d, 50d avgs; above 100d, 200d, 300d, 400d avgs
Uptrend Line below since 11-11-11; line from 1-20-09 closing low 78.20 up thru 2-4-10 close 192.05
Downtrend Line none significant
RSI 14 Day = 32.84 is nearing oversold, plunging
RSI 28 Day = 53.47 is reasonable, slightly ascending
MACD (12,26,9) = -2.32, descending
Volume high 23.3M latest day, 50 day avg = 20.7M
Price Earnings Ratio (ttm) lower 18.11


Conclusion Apple dropped below the 50-day average on rumors that production may have been cut for the iPad and/or iPhone. At this point, the uncertainty created is unsubstantiated. AAPL is down -8.91% since reporting calendar Q3 earnings on October 18. CEO Tim Cook and CFO Peter Oppenheimer attributed the calendar Q3 earnings stumble 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 had 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
There was controversy, and uncertainty, on rumors that Apple may have cut production of iPhone and/or iPad recently. Some of the rumored iPad cuts were attributed to the soon-to-be-launched Amazon Kindle Fire. However, others said any production adjustments were nothing significant and the result of either a "clearer demand picture" or iPhone production delays.
● comScore reported Apple has a 27.4% USA smartphone market share for the QE 9-30-11, up +0.8 from Q2. Google continues to lead at 44.8%, up +4.6.
● Gary Morganthaler thinks Apple, because of  Siri on iOS, has a 2-year lead on Google Android as the best smartphone platform. Google must come up with not just a speech recognition software, but cross the threshold to natural language input and understanding.
● Apple plans $8 billion in capital spending for fiscal 2012, more than twice the $3.4 billion that it spent this year. Spending on retail operations will rise to $900 million from $614 million. CFO Peter Oppenheimer said Apple would open 40 stores in 2012 and that most of those would be outside the United States.
● Apple earned more than half of all Q3 industry profits among mobile handset OEMs according to Canaccord Genuity technology analyst Michael Walkley. “Apple generated a remarkable 52% of handset industry operating profits among the top 8 OEMs.” (Forbes)
● Seeking to retain its management team in the wake of former Chief Executive Officer Steve Jobs’s death last month, Apple gave $60 million restricted-stock grants to most of its senior vice presidents. (Bloomberg)
● Harris Interactive reported most American youths, ages 8-24, prefer Apple as best brand for gaming, technology, and telecom.
● Per the annual SEC Form 10-K filed 10-26-11 for the FYE 9-24-11, Apple had 60,400 full-time employees and 2,900 temporary full-time employees and contractors as of September 24, 2011. More than 50% of total employees work in the 357 retail Apple stores.
● Strategy Analytics reported that Samsung led, and surpassed Apple, in Q3 smartphone shipments with 27.8M units, Apple was second at 17.1M, and Nokia was third at 16.8M.
● 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.

Apple Data AAPL's market capitalization is #2 worldwide at $356.58 billion, compared to #1 Exxon at $387.61 billion. Microsoft is #5 at $226.93 billion and IBM is #6 at $223.78 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 13.75% 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 annual SEC Form 10-K filed 10-26-11 for the FYE 9-24-11, Apple had 60,400 full-time employees and 2,900 temporary full-time employees and contractors as of September 24, 2011. More than 50% of total employees work in the 357 retail Apple stores. 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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