Monday, January 17, 2011

Steve Jobs Medical Leave and $AAPL Stock

Steve Jobs is taking medical leave, as $AAPL heads towards earnings report. What happens to the stock price?

It's funny (strange). Saturday I was driving to a friends to watch the NFL playoffs, and trying to record an AudioBoo (podcast) on my thoughts for Apple and their earnings report on Tuesday. I gave my thoughts, and then re-listened before I uploaded to AudioBoo. The sound quality was so bad, that I decided to wait until today to do the Boo, but then I woke up to the news about Steve Jobs.

Apple was taking a hit overseas last I looked. About 6% or so. And it looks like our futures are down. But Apple does report earnings tomorrow and the numbers will be strong.

First, I wish Steve well. He has been through a lot. It certainly reminds us that we are all vulnerable, no matter how rich or smart we are. Steve has taken Apple from $10 a share up to new highs in the mid-$300s. The company has been the bright spot in the bear market decade. We are all benefitting from his contributions to portable music, cell phones, and internet connectivity. Bravo, Steve!

The stock will report record numbers. There is a new deal with Verizon. With millions of customers, the iPhone and iPad will continue to sell new versions with technical upgrades to people who have embraced the products. There could be products in the pipeline for years that continue to grown earnings.

Apple is a leading stock. The stock is priced for perfection. Everyone is a believer. This is what makes it vulnerable to PE multiple compression. Even as earnings grow, the stock may fall a bit as folks aren't willing to pay a premium for $AAPL without Steve Jobs.

In the AudioBoo I didn't upload, I mentioned how Apple has price targets from $400, $500, to $1000. In addition, I mentioned that the Verizon deal means that more iPhones will be sold. The main benefactor to the deal would be Apple and Verizon, and the losers on that were Google and Research in Motion, and ATT. None of this changes as far as phone sales and monthly contracts go.

My thoughts are to lighten up on AAPL and the QQQQ, and put the money to work elsewhere. It doesn't mean AAPL will tank from here, but I think the odds are that investors realize the risk and that higher PE multiples will be difficult from here.

I also think that if the market is looking for a catalyst for a January correction, it just got one.

Disclosure: No position in AAPL

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