AAPL 9/25/2013 Daily Analysis

BATS:AAPL   Apple Inc
618 2 2
This is an updated chart from last week

Some important events are annotated on the chart.

Looking at the fundamentals, iPhone sales were vastly better than what the analysts had been expecting for the opening weekend. We saw a huge gap up to the high $490s on Monday. However, in the past few days, the gap is being filled. Some analysts (Gene Munster, Jaffray // Peter Misek, Jeffries) were questioning the accuracy of the iPhone sales, stating that 3.5 million of those sales were the 5C channel fills (sold by the carriers), and have not been purchased by the consumers. Others pointed out the fact that this year, the increased sales were contributed by China carriers, where did not participate in iPhone 5's initial opening weekend.

Either way, Apple             recognized the momentum of their sales, and expect that the quarterly earnings and gross margins to be at the higher end of the estimates, and alerted SEC


Overall, fundamentally, I think AAPL             is looking strong. There is a long wait for iPhone 5S (expected shipment is Oct for all of the models). Although sales data for 5C has not been made public, I expect that the sales for 5C is about 25% of that 5S, based on activation data provided by Localytics (http://tech.fortune.cnn.com/2013/09/23/apple-iphone-sales-localytics/). Putting into perspective, given that there is still higher demand for 5S, once supply restraints are corrected, sales for iPhone 5S might actually be 5-10X higher than 5C. Therefore, the actual usefulness and future of 5C remain unanswered.

There are still two pieces of puzzles yet to fall in

(1) China Mobile             deal announcement. Anytime now. It is not a big deal currently as supply chain is already over-stretched to meet the current demand, it would not significantly increase total iPhone sales (recall that Chinese market especially prefers the 5S over 5C, details see http://tech.fortune.cnn.com/2013/09/24/apple-iphone-china-localytics/)

(2) Increased buyback. In an era where a company is fundamentally strong, and the stock is severely under-valued, it presents an unique opportunity for buybacks. I think Icahn and Einhorn are right in call for increased buybacks. Soon enough, more and more fund managers will recognize this and increase their holdings.

What does it mean now?

For the short-term, I expect the sell off to stop (or at least slow down). How many ways can you turn a positive news into a negative news?? Today, AAPL             has found the near-term support at 20 day SMA . I expect AAPL             to consolidate in the $475 ( SMA 50) -$500 area before going back up. The volume is getting lower. Both RSI and MACD have found the bottom and are trending up.

Nice chart. This is very helpful for investors to get "up to speed" on the AAPL chart with relevant news. Well done.
Still holding LONG Oct 470 and 530 Calls.
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