Apple Inc.(NASDAQ:AAPL) gapped up close to $27 at the opening bell on Monday to close +$23.23 (+4.97%) higher for the day. The jump was due to a better than expected iPhone 5S and iPhone 5C opening weekend sales. Over 9 million units were sold since the September 20th release date and according to numerous reports the demand for the new devices have exceeded initial supply. In comparison, last year Apple was able to sell only 5 million iPhone5 units in the first 3 days on the market. With the Apple Inc stock up close to 9% in just 5 trading days, does it make it a buy, sell or hold?
While the initial sales estimate are impressive to say the least, they must be put in perspective as in comparison to the last years release of iPhone5. For instance, current release was synchronized with foreign markets release. Most importantly, iPhone 5S and iPhone 5C were made available over the weekend in China. In the past Apple Inc has released iPhones in China 2-3 weeks after the initial US release date. Plus, since Apple Inc is not breaking down sales number by phone there is still a lot of confusion if the consumers are gravitating towards the iPhone 5S or the cheaper iPhone 5C version. Understanding this little data point could give an important insight into consumers mindset and predict the near term future of the smart phone market.
Still, either way you look at it, Apple’s initial iPhone sales numbers were incredible. Given the sales surge over the weekend Apple Inc filled an 8-K form with the Securities and Exchange Commission today stating that they expect its next quarter’s sales to come in at the high end of the estimated $34 to $37 Billion made in July. Further, the company estimated that the gross margins will be at the higher end of the previously provided range of 36% to 37%. These record breaking numbers are sure to put an exclamation mark on what has been a record breaking fiscal year for Apple Inc, ending on September 30th, 2013.
While Apple Inc is surging forward, its old rival BlackBerry Ltd (NASDAQ: BBBY) announced that it has received an offer to be acquired by Fairfax Financial Holdings Ltd at $9.00 a share. Once a smart phone market leader BlackBerry is now a shell of its former glory days. The company has failed miserably to maintain its innovation lead against both Apple and Samsung (OTCMRKTS: SSNLF) since the first iPhone introduction back in 2007.
When you think Apple Inc standing couldn’t get any better, it actually does. Since release of its iOS 7, over 200 million users switched to the latest operating system. As part of the upgrade Apple Inc has introduced a new product called iTunes Radio, which now has over 11Million users. That spelled disaster for the stock price of Pandora Media Inc (NYSE: P) whose stock declined by more than 10% since Apple’s iTunes Radio introduction.
Will Apple Inc eat Pandora’s lunch as well? It certainly looks like that. With over 11 Million listeners in just a few days, direct to consumer infrastructure (iPhone/iPad/iPod and iTunes) and top of the line brand name, I believe Apple’s entrance spells serious trouble for Pandora Media’s future.
Given this overwhelmingly positive fundamental picture Apple’s stock still trades well below its all time high of around $700 set exactly a year ago. What does this all mean? Fundamentally speaking and given its growth rate Apple Inc stock is not that expensive. At the same time investors might be a little bit confused in regards to just how much longer Apple Inc can maintain its growth rates and leadership position.
Technical picture represents a much more exciting opportunity. Apple Inc stock has been stuck in what can be described as a trading range between $390-550 for close to 9 months. Now there are signs that the stock has bottomed and is ready to go up again. We are approaching an important point here. If the stock breaks above $500 over the next few weeks, it might be a good idea to start building a long position. Should the stock break above $550, it would be a technical confirmation that the bull market in Apple Inc stock has resumed.
At the same time, Monday’s gap from $470 up to $490 must be closed before any full on bull move can resume. As such and given overwhelming positive news for the Apple Inc I would anticipate a short term pullback before resumption of the possible bull move.
Recommendation: Hold If Own. If not, wait for either Bullish or Bearish confirmation.
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