We held up well today but none of that matters now.
Apple had their earnings after the bell and turned in a great performance with 2.29M Macs sold, about 5% over estimates and up 51% from last year. IPhone sales were in-line at 1.7M and IPods were a beat with 10.6M sold during the quarter. On the whole, the company earned $1.05Bn on $7.51Bn in sales (13%), as I pointed out this morning, this is quite a bit more efficient than XOM, who need you to give them $116Bn to make $11Bn (9%).
The only black spot on Apple's report was a drop in gross margins from 35.1 last year to 32.9 and that's because, unlike XOM, APPL spends money on R&D to increase production and deliver a cheaper product to the consumer in greater quantity and that causes them to grow at a pace that is double that of XOM and othe bloated oil giants, who can only think to defend their profits by squeezing more money out of consumers for the same product each quarter.
Apple also, as usual, low-balled guidance to $1 on $7.2Bn in forecasted revenues for what is traditionally their slowest quarter but, most importantly, in the conference call, the company said about 1/3 of the Fortune 500 has signed up for Apple's beta enterprise program, something that sent RIMM stock lower overnight. Another bright spot was, again, the Apple stores, with a 48% increase in revenue per store over last year (7.1M and 208 stores, 45 new stores planned this year). It's also nice to know that when you buy a share of Apple for $163, you are also getting your share of their $19.4Bn in cash against zero debt, not bad on a $143Bn market cap!
Of course Apple is sandbagging even these numbers as they have "deferred" $3.8Bn of IPhone revenue in less than one year – that will be a nice little boost as they begin to recognize it. ITunes sales were up 10% over last quarter and Apple now sells 85% of all legally downloaded music in the US. All in all it was a very nice quarter!
It looks like our Applefly play will be right on the money. Our small virtual portfolio play was:
| Buy 2 AAPL JUL 2008 165 Call (.APVGM) | $13.93 | $2,796.00 |
| Sell -3 AAPL MAY 2008 155 Call (.APVEK) | $14.10 | ($4,065.00) |
| Buy 2 AAPL JUN 2008 155 Call (.APVFK) | $17.60 | $3,270.00 |
Apple looks to be right in our sweet spot at $160 but we'll have to wait and see how much premium our long positions maintain. We're in for net $2,001 in each of our small virtual portfolios and about 3 times that in our Day Trading Portflio and any range for Apple between $160 and $170 is right in our sweet spot so congrats to all who played but there's still going to be plenty of work to do should we decide to ride this out through expiration.
