Is AAPL a RIMM Shot?

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Do you remember when RIMM/Blackberry went from invincible market leader in smart phones sporting a stock price of $150, then quickly collapsed to $35 in just 4 months? It has never retaken those highs and recently traded as low as $6 before its recent dead cat bounce. Is APPL the next RIMM?

The gist of those recent AAPL rumors as reported by the WSJ were correct after-all as iPhone sales and profit margins were not as robust as expected. Projections for next quarter have been revised down and price targets of $1000 forgotten. What a difference just a few months can make in a high flying tech stock. In Apple's case, over $200 billion in market cap has been lost since its peak last September, when it topped $700 per share.

Our September 30, 2012 edition of market outlook focused on AAPL and highlighted that its ability to maintain juicy profit margins and its "cool" counter culture image was questionable. The move into bigger size screens for smart phones has hurt sales and left AAPL vulnerable. Those issues have clearly come home to roost.

So, what's next for what is now the second most valuable corporation in the world? The questions loom on whether or not AAPL remains a value play or still a growth and momentum play. Until the market sorts that out, the pressure on the stock will continue. With slowing sales growth and tighter margins long term value players are wondering what is good value? Growth and Momentum players have to be disappointed and many have bailed. Diehard momentum investors have to hope that the last quarter was an anomaly and not a permanent ailment.

However, the current implied volatility of AAPL options are currently trading at, (after the huge 70 point drop this week) levels that one could surmise the big growth story is over for the moment as options players are not expecting a big or fast turnaround. However, to keep things in perspective, one quarter is not a trend and AAPL is racking earnings at an incredible $13 billion per quarter. If it can continue to accumulate earnings at that clip for the next five years, the AAPL cash hoard would exceed its current market cap today. That certainly seems like a good value.

But if one projects a doomsday scenario such as what happened with RIMM, which went from great profits to an operating loss in less than three years, then it's not even a value play. AAPL still has incredible earnings, even better cash flow and $137 billion in cash that makes the doomsday scenario a risky bet. We favor some old fashioned tape reading for trading AAPL. Meanwhile, the general market is soaring, poised for more. Long bonds look toppy and precious metals are at an inflection point. Let's go to the video...