We ask once again, “Will Apple Win the Pennant.” Note the stock’s bullish pennant formation and that it has been holding and now clear of its 50-day moving average. Lots of bullish chatter today from Julian Robertson saying the valuation is ridiculously cheap and the stock would by 3-4x higher if this were the 1980’s. Morgan Stanley was also out today noting the company will likely return some of its $76 billion cash to shareholders.
Furthermore, the company is close to a new product release in the iPhone5. It’s now or never for the stock to break to new highs. Apple could provide the leadership for the U.S. market or move higher on its own. The risk is that the macro swans spoil the pennant race. Place your bets, you know which side of the ship we’re on.
(click here if chart is not observable)
Morgan Stanley’s argument for why Apple is more likely than ever to give a dividend or perform a buyback falls flat to me. Their argument boils down to:
(1) Apple has way more cash than necessary and should give it back to shareholders. Some good supporting reasoning is given.
(2) Apple has moved into the number 1 position, so it should engage in dividends or buybacks to stay there, and
(3) There is a new leader at the helm. Perhaps this is the time to expect a change.
Now, I am not arguing with argument number 1. I am just observing that this line of reasoning has been true for a very long time, so it is not likely to sway Apple now. They have some sort of reasoning behind their decisions that they simply aren’t disclosing in great detail. I do find argument number 2 irrelevant. Passing Exxon was a feather in AAPL’s cap, for sure. But it is symbolic at best and was never a goal. It is a byproduct, and it will not be a goal going forward either. Argument number 3 is questionable too. I think that Tim Cook has been part and parcel of the Apple strategies for a very long time. I find it highly likely that he has completely bought into Apple’s strategies, from top to bottom. I would not expect Tim Cook to suddenly displaying his own flair for doing things differently. Actually, that would concern me. I like to believe that he carries the Apple DNA forward, because for whatever reason, that unconventional way of doing things apparently WORKS.
Argee, Thompson. I think they should split the stock… The competition with Google may rule that out, however.
Hmmm. I’m not sure it’s “now or never for the stock to break out to new highs.” I’d say it’s more like now or later, which is to say the pattern could fail on macro weakness and the new highs would still come without too much delay.
Good points, Joey.. I think the technicals and fundamentals are strongest to take Apple higher unless we have a full blown panic out of Europe. I should have been more clear. But, this Apple’s time to make the move. The problem also is the stock never gives you a chance to get long on the breakout. That’s why I won’t wait to break the pennant to the upside. Thanks for the post and reading GMM.
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