Short and to the point, a nice read.
SOURCE:
http://bullishcross.com/2012/05/bullish-cross-initiates-rare-buy-rating-on-apple/
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EPS 28c vs. 44c a year ago (-36%). Guides for a loss of $260M to a profit of $40M. Shares up 9% for a mighty 175+ P/E.
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Nicu
make that 12% and 180 P/E – we really live in a world of fools
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GotWake
Absolutely amazing!
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Nicu
It even pulls AAPL up LOL
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Nicu
Apple the bubble, you know
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GotWake
It’s funny how there will be an article every few months for the next year talking about “How can Apple keep doing it?” and not a single question about a 180 PE stock.
God, wouldn’t you just love to know when the amzn bubble is going to burst……. beep beep beep (backing up the truck to load up on shorts).
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Nicu
That’s the problem with bubbles, they can kill you in either direction … I wonder how I could take advantage of it but I do not find anything re
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Nicu
reasonable, when dealing with unreasonable investors
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conshmillo
There is a deeper question that needs to be asked. And that is what is the true value of PE as an indicator. Short term it has no value whatsoever. Medium term, still no value as you can see on Amazon. Long term (investor time frame) value? Maybe , some. Look at how long is Amazon pulling this off. And they are not by any means the only ones. Zacks, that can produce over 30% annually for their members in investing time frame, makes most of their calculations based on tracking the earnings. Seems to be much better fundamental indicator than PE.
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conshmillo
@”take advantage”
That’s what trend traders do. Check anything from Michael Covel. He wrote extensively about turtles and trend trading.
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Zee
@ Nicu. Re the bubble. You use the same brain but change your hat to effectively change the atmosphere and landscape surrounding Amazon’s bubble. Amazon has no competitors. WalMart is capable of changing that. A proposal and map for WakMart could change reality. And there are maps and models for WalMart to affectively follow. Once to get them rolling you get out of the picture while the rest of the process transpires. And bet accordingly. Perfectly ethical too. But I must confess. I don’t know much about Amazon or WalMart. Although it does seen logical to imagine that WalMart could be one of the best bets for going head to head with Amazon. And then things would get interesting.
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Nicu
P/E is interesting because it gives you an idea of how many years of profits you are paying for. The “real” value of a stock is the total value of future earnings discounted for risks and interest rates. When you pay every quarter 50 more years of profits (after the risk discount), you realize that this is not a good investment in any time frame, except if the company starts growing profits exponentially. But we see that Amazon’s job is to be in a business where gross and operating margins tend to zero and even negative (they project losses, mind you). They would have to increase sales super-exponentially for the share price to be justified on future earnings. And people somehow think this is risk free.
They may not have an online competition. But their sales growth is partially fueled by tax exemptions, which will not go on for long. Once they have to pay those, they will be marginally cheaper that classical retail. And so many people prefer seeing and touching what they buy. Please don’t tell me that they will thrive on (exclusive) e-books on the Kindle and justify a $100B valuation.
Vilo, of course in a bubble P/E does not matter. It’s the pinnacle of irrationality. And I suspect you can be caught on the wrong foot even when using technicals.
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Nicu
OK, I made a mistake here. Only operating margins will soon be negligible or negative, not gross margin. This was 24%. If they can maintain that in the long term, it’s a nice business. But only absolutely great business deserve $100B valuation. They have 65k employees and adding more quite fast. Operating costs will always keep profit margin very low. If they multiply sales by 4 and profit margins by 3 they will basically achieve their peak and at today’s price that would mean a P/E of 15. Apple is growing faster, having room to quadruple as a business in a few years and has a TRAILING P/E of less than 15.
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conshmillo
I think people do not go only for real value (which PE shows). They go also, if not more for perceived value. Perceived value is what causes irrationality. That’s why people can pay so much for something that doesn’t have value yet. Perceived value is mirrored in charts. As it shows how much are people willing to pay for something at the moment. Chart is not making this data up. It is just reflector of group human behavior. If it constantly generates new higher highs and higher lows, that means people are still pumping money in it. It may go up 400%+ on PE of 170 like Amazon did on perception alone. Imagine one tried to short Amazon two years ago. Imagine he did it on margin. Ouch.
Enter the short term trader that doesn’t give a hood about PE. He goes in because chart shows people are insane and keep pumping money in this dud. Difference is, he is not investor. He is not in it for long haul. He is not married to it. He sets his stops tight and let it ride as far as it will go. Or he just ride 10 day swing based on low stochastic. Or plays new breakout. In either case he will not stay long enough to see sweet fruits or sour grapes of PE. It literally does not matter in that time frame.
I think the main thing here is that trader is not investor.
Another thing that comes to mind why people are willing to overpay for something like AMZN and are reluctant to buy AAPL is the large number illusion. AAPL looks expensive per share price. AMZN doesn’t. As crazy as it sounds, people do this all the time.
The ultimate question is, which one is a true value? Logical value or perceived value? For trader, true value is what people are willing to pay at the moment. For long term investor true value is what fundamentals show as this indicates company might be around long time and thrive.
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I was again too optimistic with my EPS estimates (it seems to happen every other quarter) so I’m a bit annoyed.
On the other hand, all the work of repositioning my portfolio that I have reported here during the last two weeks, payed $100k in portfolio value today
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conshmillo
hey Nicu, congrats on successful earnings play!
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Nicu
thanks!
it is basically my algorithm that was accelerated both by the pullback and the good earnings – and a bit of luck that I more or less exhausted my free cash exactly when we touched bottom
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premarket down again because of this
I do not know how this would affect my 38.78M prediction if I wanted to change something so late in the game …
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eatingbeets
you buying any downside protection? I think the stock with be fine in the long run but things might get nasty tonight. In hindsight I wonder if Tim Cook and the other execs sold shares a few weeks ago because they knew a weak quarter was coming. I usually don’t think much of those trades but now it makes one think…
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Nicu
I do not think they are allowed to trade / sell on that info. It would be stupid of them to break such a basic rule.
No, I do not buy any AAPL downside protection. I only have about $2500 in TVIX and VXX which should protect when the whole market goes down the drain. I wanted to get more but VIX went up and I have spent lots of cash on AAPL calls. The only real downside protection is that I only have long term calls.
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Nicu
35.1M iPhone, 11.8M iPads, $12.3 EPS, $39.19B revenue, 47.4% GM
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Nicu
4M Macs, 7.7M iPods – I was too optimistic on everything except GM and iPods
but at least the shares are nicely up above $598
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Zee
I think it was psychologically important that the price for AAPL in AH went over Google’s closing price. JMHO. Cheers everyone! BTW OINK OINK!!
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ken
i replaced half my shares with equivalent level Depp IM LEAPS (Jan ’13, and ’14) as I think the catalysts will lift massive later this year; I was going to add some some risk to counter that lower risk move with some of these as well- deciding between the J13 $770 C and the $640 C @ $51 to put intrinsic break even under 700
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ken
Depp >> Deep
J13 $770 C >> J13 $700 C -
Nicu
As I already have plenty of J13 $545 C, I do not need the safety of $650 C but the better leverage of those $700 C. I also have a few J14 $600 C and I may buy J14 $700 C (limit order now at $60).
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Nicu
in J13 $720 C @ $35.5 with cash from
exchanged J13 $560 C to $580 C for $10.8 creditI’m trying to get some more J14 $740 C to get to a very stable position (35 long term calls with 25 of them ITM at $600) and I still keep some cash, should there be a pullback, I could lower the strike of those calls I have bought lately
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Nicu
those were J13 $725 C (not $720 C), anyway, improved them to $700 C for $6.35
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eatingbeets
Exchanged 10 shares for another J14 $790 C (and some cash) during today’s dip. If we see $1000 by the end of the year I will be a VERY happy man
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Nicu
by the end of the year it sounds a bit too bullish even for me, but as it is J14 C, there is time
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Nicu
exchanged J13 $580 C to $590 C for $4.4 credit
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Nicu
much lower than I could get during good times, but booked a $60k paper loss for taxes and improved the other higher strike calls and have some cash for other operations if we go even lower
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Nicu
exchanged again to J13 $600 C for $3.4 – this is a horrible price to get for a $10 call spread on AAPL, but I need cash, there are too many opportunities out there
I could have reasonably expected to obtain at least double (but max 230%) in 6 to 8 months, but I see some opportunities that are better than that, but maybe with a longer time frame (AXPW is trading for 34c, after good progress and new contracts – I cannot exclude them to get to $2 in 12 months)
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Nicu
in J14 $750 C @ $70 – I got this mini-rally of $10 in a few minutes when I was trying to optimize some 50c in the price of options and I have ended paying much more for those
I will not enter any more long term calls any time soon; I will lower the strike of some if there is a pullback.
Mid-term strategy is to exchange my J13 $580 to J14 for a higher strike and a bit of cash when AAPL will be above $700 (thus the premiums J13 and J14 are closer as they will be deep ITM hopefully); should this strategy work (it should, we may get even above $800 by the end of the year), my 35 calls will worth about $1M when AAPL will be at $1000.
Long term strategy is to get to 50+ long term calls by the time AAPL hits $1000 so from $1000 to $1500+ I get $2.5M extra (there may be some $.5M in common between the two as most options will be rolled over).
I know all that seems crazy now when my portfolio is only a bit over $400k. But my crystal ball tells me there are no real roadblocks up to $1500 so I just try to look at the big picture and do the best I can until then in a responsible manner (if there is one with options). It may take 1.5 to 3 years to get there but I hope I have matured enough to make this strategy work
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ken
I’m running a similar strategy with
J13 $480 DITM, $550 ITM, $600 ATM, $680 OTM for leverage;
J14 $470 DITM, $685 OTM
looking to increase the J14
also carrying a little July12 to sell if the earnings pop the stock;
both my short and midterm strategy though largely consists of share holdings- I’m think of rebalancing to more options and less shares;thanks for sharing your position and strategies and good write up on Seeking Alpha on AAPL earnings.
ken
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ken
July12 C is at $600;
I also Sell puts 10-20% below market each quarter for cash; rarely been put, but when they are I just sell covered calls against them while they recover
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Nicu
improved J14 $750 C to $730 C for an average of $5.15
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Nicu
improved J14 $730 C to J14 $700 C @ $7.5
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Nicu
improved J13 $700 C to $690 C for $2.4
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ken
i think those are good improvements – deeper in the money is better IMO (I’m fairly deep per above) – added J14 $550 and J14 $600 to round out my options while it’s down-
sold another 50% of stock to finish taking the profits from January rise-
now holding about the same net tracking position in long term options but with lots of cash profit to exercise if more pull back, but will do great if it takes off via the options. Its pretty brutal out there!-
Nicu
I am stretching a bit to reach more leverage. I could not own even a quarter of the shares represented by my calls. 25 of them are near the money and the first of them are to expire in J13. I know I take risks, especially a really bad situation in Europe, but by my estimates AAPL cannot stay too long below $700.
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Nicu
improved again to $680 C for $2.3
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Nicu
improved again to $670 C for $2.5
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Nicu
improved again to $660 C for $2.1
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Nicu
in J13 $725 C @ $20 – just for more leverage
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Nicu
OK now, I am done improving and buying calls, and almost out of cash
(still have some $23.5k but also some shorted TSLA puts that require some backing)Can we have a nice lift tonight, please ?
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Earnings call on May 9.
Still waiting for my short squeeze, I now have 701 TSLA calls, most of them bought for 5c, 266 to expire (probably worthless next week) and another 150 May C. Plus 7 shorted puts (Jan ’14).
In the unlikely situation that TSLA goes above $55 next week, for each $ up I get $70k. Should that happen in May, “only” $43.5k / $ flight, unless I buy more
I’ll keep posting about any new or attempt to break $40 and beyond
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Nicu
any new -> any news
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ken
noticed days-to-cover shorts dropped significantly to 14 days – lowest it’s been in a long time and half of it’s high mark
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Nicu
yep, they have also covered quite a lot of shares lately
I wonder when the effect of the 7% OTC trade will be absorbed to let eventual good news be reflected in the stock price
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ken
i think that was about 4M shares; since then about 1.5M have come out of the shorts alone; should be absorbed pretty soon assuming initial buyers hold many of them long term
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Nicu
I’m afraid it was 7% of the whole company, not of the float. Look here for those 7.297M shares, on the name “AL DARMAKI H.E. AHMED SAIF”
http://www.nasdaq.com/symbol/tsla/insider-trades?page=7-
ken
yowser- you’re right- well that will likely kill the short squeeze for this upcoming report IMO. maybe the june 6 shareholder meeting will provide the model S production schedule update that will squeeze. I think I’ll move out some of my options… thanks for the link Nicu
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Nicu
remember that they have sold everything in one block, they are not trying to unload it in the market; the buyer may try, but not for a loss; so probably the market has just anticipated this move so we are lower because of fear of a drop due to oversupply; so even if the buyer did not sell one share and has no intention to do so, the market could feel the gravitational wave
all that said, it is very hard to predict with logic such an intertwined system and the short squeeze is a low probability event to arrive during a long period of time – I will try to be prepared for that at least until September
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ken
yeah – good point; by the way just finished reading the just published 2011 annual report – no surprised- everything still on schedule for now:
from conclusion Elan statement:
“2012 – The Year of Model S
Our core objective in 2012 is to deliver a Model S that is thoroughly delightful. Very soon, customers will be able to drive and experience the product in its fullness. They will not be disappointed.” -
Nicu
Just published? Tesla’s own report filled on March 3 and amended on March 28? Could you share a link?
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ken
dated April 13- I just received it via e-mail for the shareholder’s meeting; i posted a copy here for download:
https://files.me.com/kenliles/5hrmmtken
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Nicu
thanks!
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ken
May 9 earnings report same day as current schedule for the SpaceX critical launch- I know Elan will make the launch if it goes (Florida)- I’ll be impressed if he joins the report as well
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ken
conflicting schedules though – on their site the launch is tentative May 7 instead of 9; maybe he told ‘em he wanted to make both!
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Nicu
I only knew about 7 until now
– busy week -
ken
yeah- I saw the May 9th in an earlier profile interview when April 29 was bumped out; but I think now it was probably never actually the scheduled date; probably always officially the 7th
– busy week is right! -
Nicu
if I read this correctly, on May 7, Toyota will show for the first time the final version of the RAV 4 EV
http://green.autoblog.com/2012/04/30/new-toyota-rav4-ev-coming-to-evs26-next-week/are stars starting to align? Toyota launching RAV 4, the new contract with Daimler may have been signed, Model S arriving on schedule … or maybe I’m just too optimistic again, the main weakness of investors btw
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ken
well if so, it’s a weakness shared;
That’s exactly the way I read it too.
In fact, the Daimler additional contract was a bit of a surprise and may be what Elon was hinting at last quarter. Significant expansion of potential revenue next year.
I was also surprised at the RAV4 characterization (knew about the partnership of course)- that hints at a major re-design of the RAV4 to leverage the TESLA drive train (I thought it more a retrofit into the current design – guess we’ll see soon)All-in-all – my read (along with other factors) resulted in purchase of additional $30C J13 and $30C J14 options today which can still be had at break even below $40
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ken
OT- SpaceX test firing today was successful- launch still set for May 7 pending review of the data
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Nicu
TSLA just broke $30 (downward)
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chach17
So what’s the deal? Lots of people shorting in case of bad news tomorrow? Selloff seems a bit extreme to me, especially with how poor the stock has been performing over the last few weeks.
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Nicu
no idea if there is still related to the 7M shares sold OTC in March or simply an oversized beta – I just hope it is not inside info of bad news
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Nicu
reading their 2011 report I have seen that they have spent about $30M less in 2011 than expected and most of this got transferred to Q1; couple that with low sales (no more Roadsters in US + transition period with Toyota and Daimler) and ramping up the factory preparations and inventory – EPS could be considerably worse than expected and shorts could use that to hit it when it is down
I am slowly accumulating cheap calls (I am at 600 now, 150 will expire in 2 weeks) at different strikes
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ken
I saw a write up (on Market Watch I think) that showed a very large percentage of Call buying They speculated it was shorts placing hedge against the upcoming report. I think the drop is due to general market selling coupled with theory of oil futures plummeting to hurt EV I’m holding heavy position in j14 Calls and medium heavy in J13 Calls with some Calls to expire in a couple of weeks and just a few in Sept’12 I think the shorts are celebrating the timing of Europe and general market sell off to help them push through
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Nicu
New blog post, with curious timing, 1-2 hours before the earnings call
http://www.teslamotors.com/blog/model-s-efficiency-and-range“We are looking forward to rolling out Model S to our customers this quarter …”
emphasis mine -
Nicu
shareholder letter here (earnings press release)
http://files.shareholder.com/downloads/ABEA-4CW8X0/1340602324x5931423x567959/9429b5fe-3ebc-4e93-9fe9-7655b15301f1/Q1%202012%20Tesla%20Shareholder%20Letter.pdfwill read it and try to post a résumé, TSLA up $1.5 AH
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Nicu
eh, before reading it, they make a resume at the beginning of the document
“Model S deliveries to start ahead of schedule in June
Model S reservations top 10,000
Daimler Mercedes powertrain agreement signed
Toyota RAV4 powertrain shipments begin ahead of schedule
Solid Roadster demand & gross margin” -
Nicu
Everything looks good, including cash on hand ($387M including $104M of the remaining DoE loan – they plan to use the entire loan during this quarter and the next). This quarter they will start selling cars so they will be able to convert those reservations (+ remainder to pay) into working capital.
Roadster gross margin 28%. R&D contracts gross margin 45%, for a total of 34%. Do you know many hardware companies with GM above 30% ?
TSLA up 8.45% AH
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Nicu
From the call:
☀ Elon is confident of achieving 20k cars annualized run rate by the end of the year
☀ Also “increasingly confident” of achieving 25% GM at that point (on the Model S itself)
☀ rated 89 mpge, they will try to improve the charger and therefore the numbers
☀ Exciting news about the charging infrastructure to come in July (or so)
☀ Goal to start selling Model S in China by the end of 2013
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Nicu
Short interest almost stable around 23.5M shares (as of end of April)
Large volume today (almost 4M) and the share is up 12%
Should it whip the bears for a few days, we may get some shorts to crack and run for the exit …
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ken
been monitoring from out of town- thanks for posting synopsis results Nicu– Production moved up to June is key and speaks a lot about the internal processes.And should continue to set up for short squeeze next quarter
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there is a chance for AAPL > GOOG today
if my memory does not fail me as usual, Jobs said this should have been the case a long time ago
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Great guy (author of “Innovator’s dilemma”) gives a cool interview
http://techcrunch.com/2012/04/02/keen-on-clay-christensen-how-to-escape-the-innovators-dilemma-tctv/
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GotWake
Are we starting our run up to earnings?
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Nicu
three weeks is such a long time in the post-modern market …
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Nicu
We had today a second very high 12 month target $910
http://tech.fortune.cnn.com/2012/04/03/munster-how-apple-becomes-the-first-1-trillion-company/Motorola (therefore Google) in going to break its neck with its FRAND strategy
iPad is winning satisfaction and buying intentions surveys, recommendations etc.When all stars are aligning like that and the share price goes up in total impunity, I get scared and prepare for an ugly pullback – maybe it’s just from repeated traumatic experiences starting in 2008, or maybe I’m just getting old … but better safe than sorry!
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GotWake
Good point. There have definitely been a lot of things going right for Apple the last few days. I hadn’t seen the $910 upgrade.
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Nicu
I assume you have seen the $1001
http://tech.fortune.cnn.com/2012/04/02/behind-the-new-street-high-apple-price-target-1001/-
GotWake
Yeah, I saw that one.
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ken 7:18 pm on May 17, 2012 2 days ago Reply
thanks for that- missed it somehow; Due to the European-US Election-Pending US budget showdown issues, I’ve moved my J13 Calls to either cash or J14 Calls. I agree with this Bullish Cross call and it’s a welcome sign to see it, but given my concern of above market drivers coming, I’m going to stick with J14 Calls. Added a DITM today and will move up the strike ladder from here (I currently range $470,$550,$600,$650).
Any thoughts on this strategy? Better leverage with J13 of course and maybe I should go back into some of those, but just concerned with APPL getting dragged with market…
Nicu 7:25 pm on May 17, 2012 2 days ago Reply
I do not afford to buy only J14 C so I stick with what I have (30 J13 and 10 J14 – all OTM for the moment). I already do stay away from shorter term calls, I would prefer only J14 to sleep better. On the other hand the P/E is so compressed, good earnings will just push the price up, even against the market. My only concern is if that arises only in January. So my hope is to see at least $700 by the end of the year and then exchange my J13 to J14 with a small loss on the strike. This time next year we should be nicely above $800 and I hope to have at that point about 50 calls ITM … will see.
conshmillo 9:56 pm on May 17, 2012 2 days ago Reply
With gold’s strong showing today after weeks of falling, tomorrow’s Facebook IPO, hugely oversold Dow, there is a good chance tomorrow to be a reversal day. Although I have to say intraday action today was totally insane. 15 minutes full throttle up, next 15 minutes full throttle down, all day like that. No direction. I think Greece is doing a number on a lot of people minds.
ken 10:56 pm on May 17, 2012 2 days ago Reply
my thoughts exactly – it’s a real fence walk right now. it’s nothing but a guess of course, but my feeling is the market will break down in the next days and drop to new lows, squeezing out the Europe worry, before rallying. I’m holding most of my cash in preparation (although holding strong J14 Call levels from earlier – bleeding like Nicu’s)- although in case I’m wrong, did add another DITM J14 contract today at the low.
Generally it’s a good time to add call options as the ‘relative’ volatility premium is down (helping to bleed my existing calls unfortunately)–
thanks for your thoughts as well Nicu