Apple shares pass $200, A new Record

Apple (AAPL), is also enjoying a strong holiday as iPods are as popular as ever and the Mac computers continue to well outpace the computer industry in terms of growth, and that's without even mentioning the other "hottest gadget of the year" iPhone. Apple in fact is one of the main culprits of Amazon's (AMZN) sales success as Mac computers and iPod line ups flock the electronics best sellers lists.

Whispers about sales are starting to trickle in pegging iPhone sales around 5Million units for the year, well above of most analysts 3-4Million estimates. Thanks in part to initial success with European launches and the $200 price cut that the device saw earlier in the fall. Considering that Apple's goals were to sell 10Million units by the end of next year it appears the company, for all intensive purposes, is well on its way. And its only the beginning as the device is officially on sale in only 4 countries. Once confirmed news of iPhone deals in China, Japan and the rest of Europe hits, the early sales goals will, in retrospect seem completely low-balled.

Apple's forgotten, and not so well selling device, AppleTV seems to be in the spotlight again as analysts expect an upgrade to the unit as well as the content available for it with iTunes. Apple's famous MacWorld Expo is just on the horizon and it is this event that usually brings with it product introductions, company metrics and newly minted partnerships. The hope is that Apple will bring aboard more movie studios to iTunes and perhaps expand the sales model to also include rentals. Reports coming in suggest that Fox is the first to sign on for the "rental" model and that this will be announced at the Expo. This feature should give the AppleTV some new life and perhaps force an upgrade, including the long wanted HD content in iTunes. Having Rentals and HD Video in the iTunes store come MacWorld would be 2 very big steps in the right direction to not only Apple but the entertainment giants as well.

Digital Rentals are a market that hasn't taken off yet, with many players attempting to make it work but no one dominating. Microsoft, through Xbox is trying, Amazon is trying, NetFlix and Blockbuster were trying too. The verdict, nothing really works well and each platform simply isn't wide enough. But iTunes, with its Billions of downloaded songs, and 100 million downloaded videos may just be that massive machine to get the ball rolling. Much as the demise of the CD caught the music industry off guard the last year or 2, I see a similar fate coming to DVD, with everything going digital. It doesn't help that the next gen HD disc format is in a war that is dividing consumers and studios either. So, should I get a Blu Ray player? An HD DVD player? a combo player just in case?

Too many questions, no real answer, or could there be? 120Million iPods have been sold, iTunes is seemingly on the majority on computers already, HD rentals would take off on this platform within 12-18 months pushing next gen disc formats aside as Digital content truly becomes King, Broadband expansion will make downloads quicker and that hurdle of "downloading time" will be a thing of the past.

When this rental announcement becomes official, more power to the Studios who stepped up, and didn't try to strong arm the one dominant player in the online Music and Movie sales business.

So is there still upside to the Apple story? Yes, but time frames have to be adjusted now. Forward P/E sits in the low 30s and the company is nearing it's marquee event, and its undoubtedly strongest quarterly report in history. So what's that mean for the investor? It means estimates are still too low and price targets will still continue to climb. Remember current Apple estimates only include 10-12Million iPhone sales by the end of 2008, no real clear idea of the revenue sharing model that will become a monthly cash cow for the company, and absolutely no AppleTV income, as the product hasn't sold well yet. Yes iPod growth is slowing, to only about 20% year over year, but Macs are surging to more than make up for that P/E ratio softening.

Bottom line, Apple at $200 is still a very interesting long term story, dips are great opportunities to accumulate, and this one will likely beat the market once again, by this time next year.

Disclosure: Author is long AAPL

Apple's Computers: Still A Growth Story

A report came out from market research firm IDC giving numbers and growth rates from PC's shipped. Link is here to AppleInsider http://www.appleinsider.com/articles/07/07/18/apples_u_s_mac_market_share_rises_to_5_6_percent_in_q2.html

The numbers show once again at how Apple (AAPL) is growing its market share in the US computer industry. In 2005 it was reported to have 4.4%, in 2006 4.8% and in 2007 5.6%. That's a lot of Macs in homes that have never had Macs before. The so-called "switcher". Steve Jobs frequently talks about Apple Retail Store foot traffic and how about half of Mac buyers are first time Apple computer buyers. This trend clearly shows just how true this statement is.
This rising trend emulates exactly how Apple's grown to become the third biggest music retailer in the US.

Call it the halo-effect from the iPod, the publicity surrounding the company lately with it's other products like iPhone or AppleTV, but one thing's for sure. Apple has its businesses clicking like never before, and its earnings numbers are expected next week. With the stock crashing through an all-time high of $140 this morning on these news you might think there's a sell the rumour buy the news opportunity prior to the quarterly earnings announcement. I wouldn't be so quick to jump on that side of the fence, while expectations for performance have never been higher for the company, they do have a juggernaut waiting in the hangar that hasn't had any official sales numbers released yet. This of course being the iPhone. While sales numbers for Macs and iPods are expected to beat consensus estimates, and handily at that, what the stock really needs to keep its upwards momentum is a clear indication that iPhones are flying off the shelves.

So what's the strategy going into earnings? I think like all growth orientated stocks you have to know what you're getting into and what the prospects are. If you're an iPhone believer and this it's truly the next big thing then get in now before the next run in Apple's stock really takes shape. A quick look at the Option interest for January 2008 shows some very optimistic investors as almost 50,000 call contracts are open for a strike price of 200. And as of today these options go for $3.60 a contract. A lot of money is being bet on the continued rise of Apple shares. So is it safer to go with the bullish herd or go against the grain and swim upstream on the bearish side of the stock? I for one believe a company as innovative as Apple, currently in the business growth cycle it finds itself in is a hard bet to pass on, so I've put away my Muleta for now and let the bull run.

Disclosure: Author is long AAPL

Innovators within Technology

It's really Apple (AAPL) and Google (GOOG) that are the two driving forces of innovation within the Internet/Computer part of the technology sector. When Google's CEO became an Apple board member there was some signs that the companies would work together on many more projects. We're seeing this now with Google Maps integration into the iPhone, YouTube on AppleTV and the iPhone and Google's search being prominent in Safari and Leopard.

Yahoo (YHOO) also is involved with Apple providing push e-mail to the iPhone, the Stock app and a host of other innovative services, however, it's a company very much in limbo, having just ousted long time CEO Terry Semel. Any reaps from their long-awaited ad platform Project Panama have yet to show major dividends and it seems like Yahoo has a long way to go to steer the ship in the right direction.

Microsoft (MSFT) on the other hand seems stuck in the mud, is a company that has far too many silos for its own good and cannot innovate as quickly as the others. While companies like Apple, Google, and Research In Motion (RIMM) are busy combining all of their products and services over a common platform, Microsoft is missing the party by having completely separate divisions trying to integrate separate products into a common themes. However thus far very few have ended in success and nothing but bad press surrounds this "innovative" company of late with Vista issues, charges on Xbox problems and who could forget the almighty Zune.

Disclosure: Author is long AAPL & GOOG

Thoughts on Apple Inc.

Apple's (AAPL) foundation of software is the driving point within all their products. Not to take anything away from the hardware, because Apple does design some of the best. However that is a smaller issue when you look at the company's successes.

With apple being able to customize everything within a given device due to native software fitting in native hardware, it certainly puts other companies behind from day 1. It would be very hard for a Verizon or a Sprint to come up with something like an OSX for their handsets, and just the same it'll be as difficult for Motorola or Nokia. On the flip-side Microsoft has Windows Mobile but it's designed to work on such a vast array of devices that it works very well on only a few.

The new OS X core of Apple's product lineup (upcoming Leopard Macs, iPhone, AppleTV and soon iPods) bring with it that level of functionality and ease of use that can only happen when a piece of software is designed to work with a piece of hardware. The iPod's success came from it's ease of use and the iPhone is, and will (through software updates) strike(ing) the exact same cord. This will in turn extend to a larger halo effect which will in turn drive more users towards the Mac platform.

Which, in the investment mind frame should launch Apple's future valuation to $150B and beyond.

Disclosure: Author is long AAPL