Thursday, March 29, 2012

Apple (NASDAQ:AAPL): Actionable Call Alert!

Wedge Partner's Brian Blair is out telling clients to cash in their chips in Apple (NASDAQ:AAPL):

Taking the Sidelines Until March Qtr Report on Possible iPad Slide

We are bullish on Apple, and we consistently have been, holding a positive view of the company and calling it the best name in tech on the growth of the iPhone and the iPad. Although that view hasn't changed, we wanted to highlight something we have noticed of late that gives us pause, and forces us to take the sidelines here at nearly $620 per share. Why? We’re concerned iPad sales may not be as strong as expectations, and we believe March could disappoint and full year production iPad expectations/forecasts may be pulled down as a result.

But What about the 3 Million Units?
The opening weekend number of 3 million was significant, and of course spoke mostly to pre-orders and to strong weekend sales from Apple’s biggest fans, but in looking at the overall demand picture, there doesn't appear to be as much of a frenzy as we expected over the new iPad. We can walk into any Apple store and get one today, easily, and that may be a problem, given rising expectations. If existing units in the channel take longer than expected to be digested by consumers, then manufacturing will be pulled back in the June quarter, and estimates for the full year will also be pulled down.

Our iPad Unit Expectations for 2012
We had expected around 9-10 million units for March, a lofty number coming off December, but have noted some expectations jumping to the 12 - 13 million unit range for this quarter. Our iPad unit expectations for CY 2012 have been between 56-60 million units and we have believed 60+ million was possible. We now believe that the full year number will likely be at the bottom of that range, possibly lower. We will reassess our unit expectations post Apple’s quarter report.




The Risks: High Expectations Too High for March
In summary, given the lofty expectations for Apple, and the recent 63% rise in share price from $380 in December to $620 yesterday, along with the litany of $700+ price targets (we have counted over 9) and raised numbers across the Street, we feel it’s prudent to take the sidelines at these levels until the company reports earnings. We see a potential disconnect, between the rising price targets/unit expectations and the broad availability of the new iPad, and pieces of evidence that suggest a potential for waning demand in the U.S. The stock may be priced for perfection at current levels, but we feel we are seeing signs of some scratches on the glass, which is reason enough to step aside for now.

Notablecalls: This is big. AAPL will be down on this. 10-15 pts. Actionable Call ALERT

4 comments: said...

I am an aapl fan & I like your advice of waiting for earnings -especially after the last few weeks of straight up in anticipation. If the report is positive and the stock starts up I'll jump back on. Otherwise I'll live with the shares I have. Thank you - good points.

AUGUST said...

Can't bring myself to buy a company that supports slave labor.

Mark said...

I'll keep what I have also. I bought in at around $150, and I'm not running away yet. As to "AUGUST"'s comment ... if you were unemployed for 44 months like I am, you'd buy the company!

sell my house said...

Apple actionable call alert is special.