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AAPL Shrugging Off Weakness
Despite disappointing retail sales numbers and a down market, shares of AAPL are fighting back after being destroyed on yesterday’s iPhone 4 report. Apple will release its June quarter earnings report on Tuesday, July 20, 2010 at 5:00 p.m ET. Future catalysts include monthly NPD data (Mac / iPod business); iPad and iPhone 4 sales updates; and possible entry into the TV market. AAPL trades at 22x estimated fiscal-year 2010 EPS and 12x Enterprise Value / Trailing Twelve Months Free Cash Flow.
Analysts Discuss iPhone Antennae Debacle (Fortune)
Views range from a $1.5 billion recall problem to a $5 Bumper case solution:
- Gene Munster at Piper Jaffray believes there are three possible outcomes: 1) If Apple gives away Bumper cases to 85% of iPhone 4 users, he estimates the company would give away 36 million cases at a $5 cost per case for a total cost of $178.5 million (or 1% of operating income over that time period); 2) He estimates that only 25% of iPhone users are periodically affected by the issue. Apple could weather the storm by letting the current demand for the iPhone speak for itself; 3) A recall is a highly unlikely scenario given the issue is completely resolved with a case.
- Toni Sacconaghi at Bernstein believes that a full recall and the issuance of a revamped phone – an option he does not think is likely – could cost Apple approximately $1.5 billion. The bigger issue is “the emerging pattern of hubris that the company has displayed,” including: refusal to fully discuss Steve Jobs’ health, attack on Adobe Flash and probe of lost iPhone, resulting in a raid on a reporter’s home.
- Katy Huberty at Morgan Stanley believes that this issue is more of a PR problem. Apple needs to address the antennae concerns to preserve the brand and loyal customer base. Full product recall is unlikely.
- Ben Reitzes at Barclays Capital tells users to get an iPhone Bumper; drop calls go away and it is quite useful anyway. He believes that concerns around product issues tend to be overblown and has not seen any overwhelming evidence of iPhone 4 units are being returned. No material impact to Apple’s momentum.
Apple Bears Don’t Stand A Chance Against Apple Fans (The Motley Fool)
Despite the scathing review from Consumer Reports, Apple aficionados refuse to stop buying the iPhone. This is the power of branding. Few if any companies have built this type of cult following. A trait that all investors should look for in companies, in which they invest. Dan Frommer agrees, this will blow over.
Goldman Sachs Believes iPad Will Kill Netbooks (9to5Mac)
Apple’s iPad is going to wipe the netbook market out, says Goldman Sachs, because of the five C’s: consumption, connect, connected, constant operation and commerce. Sorry about that, Microsoft. Netbooks were a headache for you, too, because of the lower software price-points and Linux threat, but now even those low price points are going to zero. For more pretty Goldman charts, click here.
Daily Trader: Chip Makers And Playing AAPL (Various)
Taking advantage of Apple’s success and current weakness.
- With the onset of the iPad, Kindle and other handheld devices, Samsung and Toshiba, the world’s two biggest makers of NAND flash memory chips by revenue, are boosting production now due to strong demand. These, and other chip makers, might be great peripheral stock plays.
- If you are a long-term bear, buy the 2013 Apple puts to avoid committing significant capital to outright short the company.
- Take advantage of the “Apple slingshot.” With Apple’s pristine balance sheet, exponential growth opportunity, and innovative future product pipeline gives hedge funds confidence that this stock will always bounce back after being beaten down. Look for a rebound.
- While on the Apple bandwagon for a while, Jim Cramer called the current weakness in AAPL a “buying opportunity” on Stop Trading! last night.