Wednesday, January 16, 2008

Apple: Putting $$ Where My Mouth Is.

OK kids, I finally have a position in Apple (AAPL)

I sold 4 July 2008 $280 calls (APVGW) for $258 each this morning.

Simply put, as long as the stock price of Apple is below $280, 70% higher than it is now on July 19th , I pocket the money. Should it go above, I will be out the difference between $280 and wherever it sits.


* With the rollouts of the iTouch and the iPhone, in the last twelve months shares of Apple are up 74%. There is nothing on the horizon product wise that will provide the boost the company received last year. There was no "one more thing" moment at MacWorld.
* The US economy is clearly slowing down. Citigroup's (C) and JPMorgan's (JPM) results the past two days illustrate a clear deterioration of consumer credit cards. That will lead to a contraction in consumer purchases.
* The latest results for Europe, the iPhone's recent launch area. Its economy is slowing also. Sales there have been moderate at best.
* Google's (GOOG) phone. The only folks probably more loyal to a products than Apple's are Google's
* Research in Motion's (RIMM) competing product. Until this point, Apple has had a product of one (touch screen), not anymore.
* Intel (INTC): Surprised with a disappointing quarter. May be a tech slowdown in the works.

Now none of this means Apple will not post fantastic results on Jan. 22. It does mean that there are significant headwinds that did not exist last year and up until this point in 2008. Trading at over 40 times earnings after the recent 15% fall in the stock price, 2008 will prove to be much tougher than 2007.

Now, Apple fanatics out there. I did not say Apple will lose money or see earnings decline so lets just pull out the paddles and zap ourselves into a calmer state. One would be hard pressed to think the stock will match the last 12 months performance in the next 6 though given the macro environment.

Disclosure: I guess this makes me short Apple at $280, Long Citi, None in others

Todd Sullivan's- ValuePlays

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