There are a whole lot of crosscurrents to this stock, and it will remain a battlefield, as it has been since it finally got back on traders' radars in late 2003 after its music business took off. But if business is as good as I think it has been this quarter, the risk/reward in this stock is very favorable for the bulls here over the next couple weeks ahead of its earnings report.
Since I first went long this name in the spring of 2003, I've been writing about how the company bet its future on a closed music system and the hoped-for halo effect for its computer sales. The critical mass that the company needed for its closed music system to work has long since been passed, and Apple is indeed the de facto standard for legal music downloads, as well as having a near-monopoly on the MP3 player market with the iPod.
I've owned this stock a long time, and I've been leery of giving back profits, which is why I pulled the reins back a little bit a couple weeks ago when the company announced that it was going to move to an Intel (INTC - commentary - Cramer's Take) processor platform. It's clear that such a transition is going to be at least somewhat of a detriment to the halo effect, as savvy computer buyers are (rightly) going to question why they should buy an Apple system that will be phased out within the next 18 months or so.
Regardless, pretty much every indicator and check that I can find confirms that the magnitude of the halo effect is quite profound, and that any impact that the processor transition is going to have won't affect that magnitude except on the extreme fringes. Indeed, I think Apple has cooked itself up a heckuva strong quarter yet again, and that it's going to sail past the Street's estimates and raise guidance going forward.
The Teleconomist Time to Think Different About Apple 6/7/2005 3:01 PM EDT The Intel announcement dramatically changes the risk-reward dynamic for the stock.
The Teleconomist Companies Dream of Apple's Woes 6/6/2005 8:20 AM EDT The two factors in Friday's selloff have little impact on the company's long-term prospects. Plus, a poll update.
The Teleconomist MP3 Market Will Stay an iPod Colony 5/6/2005 4:00 PM EDT Others are populating the space, and although Apple is in control there, it's not a zero-sum game.
The Teleconomist Apple Shouldn't Be Forbidden Fruit 4/27/2005 3:47 PM EDT Shares have taken a bruising, but the computer business remains the key, and estimates are still way too low.
At time of publication, the firm in which Willard is a partner was net long Apple, although positions can change at any time and without notice.
Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney. He also produces a premium product for TheStreet.com called The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns. At time of publication, the firm in which Willard is a partner had no positions in any of the securities mentioned in this column, although positions can change at any time and without notice. None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback -- click here to send him an email.
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