Apple Looks Great but I am selling with huge gains now

Apple absolutely looks fantastic but I am selling. Here is why?

Apple just reported fantastic number.  It had quarterly net income of $818 million, or 92 cents a share, up from $472 million, or 54 cents a share last year.   Its numbers beat analyst consensus by 20 cents.  The stock is understandably way up and it is closing in on my $150 sell target.

I am not selling because my sell target has been reached (about 3 years ahead of schedule).  I am also not selling because I think that this is a little bit of a short-covering induced blip and I expect the stock to fall next week.  Rather, I am a long term investor and I am calling it a gain here for fundamental reasons.

Here is why:

Revenues, which rose 24% to $5.41 billion, were mainly driven by a 36% jump in Mac sales (they sold 1.8 million, well in excess of estimates).  Mac sales have done well, but are unlikely to grow dramatically higher as the price differential between a Mac and HP or Dell is just too great for iMacs to really take off.  As Ubuntu and other Linux-based systems become viable, Apple's growth from those frustrated with Microsoft will peter out.  I think that Macs will always be a specialized product for artistic sectors.  Apple's lost the battle 20 years ago.

IPod sales are not growing at breakneck speed any longer.  While Apple does have a hell of a franchise here, there are competing formats and competing players that offer more value for the money.  Apple's continued growth is dependent on much greater international growth and this is something that Steve Jobs has never done well.

It is impossible to reconcile Apple's reported sales of 270,000 iPhones with ATT's of half of that.  Now that I have used the device I really believe that it is nothing special in spite of my previous articles and posts on this topic on this site.  I don't expect Apple to meet their projected sales numbers on this.  The device simply is not that compelling.

Thanks for a wonderful run, Steve, and I have done tremedously well with your stock.  The time has come for me to sell and take my profits.

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Comments

  • Anonymous

    July 27, 2007

    AT&T only counts activations, while Apple counted total units sold.

  • Anonymous

    July 27, 2007

    Just reading this article, I would think that you are a short, but then I read your previous postings on the site and you were in fact very bullish on the stock until now.

  • Anonymous

    July 28, 2007

    This writer fails to take into account the huge number of Mac devotees that are still using PowerPC based computers that will need to upgrade to Intel based machines at some point. I am going to get a new laptop and a iMac within the next six month or after the new iMac is available. Mac use is expanding beyond the artistic and publishing community. Enterprise/business use is going up and I think Apple will make more of push in that direction. Macs are more popular with students especially college student. Also Leopard is going to be an almost radical OS upgrade and most Mac users will want it. Some of these people are still running 10.3. Regarding iPods, currently there is a lot of pent-up demand for a new iPod with touch screen and more capacity. I am still using a 4th generation unit myself and will get the new one as soon as it is available. The sales of the new iPod will dwarf
    sales of iPhone. The foreseeable future looks pretty bright at Apple.

  • Anonymous

    August 01, 2007

    I agree with shaman about the PCs and the loyal following, but I think that there is a iPhone mania that needs to work itself off. I also believe that the iPod faces stronger competition that will soon cause prices to drop.

  • Anonymous

    August 01, 2007

    Specifically, the Sonos and the Sansa Connect pose a threat to the iPod and even potentially to Apple's music distribution model.

  • JessicaRH

    August 14, 2007

    Nice call. It is starting to look like Apple's best days are those just behind us.

  • David Gersh

    September 04, 2007

    At 37x times earnings with increasing competition to the IPod and loses of some ITunes programing, it seems like a good time to sell.

  • Jerry Green

    September 26, 2007

    It is going to 250 in a year. It is OK to step off the train, but why leave money on the table?

  • Carey Richardson

    October 11, 2007

    Dumb move. You are already kicking yourself and you'll be kicking yourself more with each passing day.

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