Thursday, February 19, 2009

Wall Street Journal: Even Apple (AAPL) is Not Immune

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First, let me say I'm a big Apple (AAPL) fan from the perspective of their long term prospects. But this infatuation with all things technology by market bulls is silly - aside from large cash hordes there is nothing to see here in my opinion other than "thesis trading". Hewlett Packard (HPQ) was not impressive, Cisco (CSCO) was not impressive, Dell (DELL) looks dead - etc.

The Wall Street Journal reports that even Apple (AAPL) is getting hit by this consumer, with January sales down 6% year over year. Apple relies on the old (current?) Nike (NKE) model - sell similar stuff to competitors but with style, cache and the like; for a premium. Not sure as this economy worsens if that is going to hold up. The market share loss is especially sharp!

p.s. I am simplifying when I say "similar stuff" - of course there is differentiation of product to a degree but a computer is a computer at its basis, a phone is a phone (even if Apple does them better). If I can't afford it, it doesn't matter how much cooler I think an iPhone is versus a Nokia (NOK) model.
  • Apple Inc.'s unit sales of computers through U.S. retail channels fell 6% in January from the same month in 2008, the first monthly decline in three years, according to market-research firm NPD Group.
  • In dollar terms, market research firm NPD Group estimates the value of Apple sales through US retail channels dropped 11%, and that the company's market share declined 16.4% -- to 13.7% -- from a year ago.
  • The data suggest that Apple's premium pricing, which helped boost revenue when demand was strong, may be hurting the company now that consumers are being more careful about their spending amid the recession.
  • Demand for Apple's laptop computers, in particular, had remained relatively solid for months despite the economic downturn as consumers were willing to pay higher prices for a sleek design and unique operating system. But NPD analyst Stephen Baker said consumers are becoming more price-sensitive as the economic climate continues to worsen. "Casual buyers or people who are trying to make a choice are trading down," Mr. Baker said.
  • Mr. Baker said he believes that consumers interested in low- to mid-range portables have been gravitating toward Apple's $999 laptop, the company's least-expensive model. He added that demand for the high-end models over $1,500 has been virtually unchanged over the past several months.
  • The average price of Apple computers stood at $1,480 for its laptops and $1,500 for desktops in January -- more than twice as high as computers based on Microsoft Corp.'s Windows operating system, NPD said.
  • Besides high price points, analysts say Apple's desktop personal-computer business has been suffering because the company hasn't significantly refreshed its lineup in more than a year. The company is widely expected to announce a new lineup of desktop machines in coming weeks, which could help boost demand.
  • NPD said unit sales of all brands of PCs rose 2% in January from a year earlier, but the dollar value of systems sold fell 16% as consumers bought less-expensive models.
This is one of the "herd" stocks and it fell yesterday to an important support level... so far this morning the action is not promising...

Since I have a lack of individual short ideas, I am going to put my money where my mouth is on this "technology is blessed" trade and short Apple (AAPL) with a 2% stake in the mid $91s. My target should be very obvious if you've been following around for a while - I'll shoot for $83. I'll add to the short if we can get to $93-$94 or below $90 (and market begins to weaken). I'll reconsider around $96 if we get a reversal to exit the short - if they try to drive the market up they will use Apple as one of the main tools.

EDIT 11:30 AM (made it a 3% stake due to lack of other individual shorts to hedge the long positions)

Please - no hate mail from the Apple fanboy crowd ;) It's just a trade

Short Apple in fund and personal account

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