Wednesday, October 10, 2007

Killing those Apple bears

I am not an Apple cheerleader. And I have not owned the stock in a decade — every time I've wanted to get in, I’ve considered it overvalued. A P/E of 46 is pretty rich for a 30-year-old growth company.

Nonetheless, looking for an answer to an unrelated question, I was amused to find an Seeking Alpha recommendation (elaborating on one from Piper Jaffray) from last March to short Apple. The stock was at $95; Wednesday it closed at $166.

This reminds me of a friend (now at Apple) who wanted to short eBay in the late 1990s; his wife fortunately talked him out of it. Shorting Microsoft and Cisco in the past decade could have been very smart if you timed it right — but the timing was not about the company’s competitive advantage, but shifts in market demand and growth multiples.

I never did find the answer to my question, which is how many AppleTV units has Apple sold. Projections prior to the March 21, 2007 ranged from 800,000 to 2 million. I would be shocked if they sold 1 million this year. My MBA students, Seth Baron and Richard Burnside, estimated 206,000 units sold in April-June, which implies (absent a model refresh) they’d be lucky to sell 600,000 units this year. But, as Seth & Rich noted, AppleTV is an “extendable software platform,” so who knows? Maybe important functionality will be added down the road.

I was dying to buy the rumored iTV, but then when I saw one in January, I said “what’s the point?” I don’t buy that much from the iTunes Store (10 songs over 3 years), but I would buy a DVR replacement for time-shifting 24.

1 comment:

Seth said...

I assume that when Apple reports Q4-07 earnings on 10/22 they will continue not to report the number of Apple TVs sold or provide any guidance to analysts. I look forward to estimating the number sold for the quarter and comparing it to various analysts’ projections. I don't think we'll see any surge until (if?) "Apple TV 2.0." I’ll keep you posted.