HAVE SALES PEAKED ON APPLE iPHONE? $AAPL

This post was just published on ZYX Buy Change Alert.

The position is long with an average price of $18.71.  The stock is trading at $95.06 as of this writing.

AAPL’s earnings and projections were below already reduced expectations.

Here is the key question, “Have iPhone sales peaked?”

Please see yesterday’s post on AAPL to see the rationale.

You be the judge, the following are the statements from the conference call, Apple said:

• iPhone sales grew at the slowest pace since its introduction in 2007
• forecast revenue declining in the current quarter, its first such drop since 2003

In our analysis, iPhone sales have peaked.

A note for new subscribers:  we have been forecasting this.  For this reason AAPL has not been in the Top-Ten for a very long time.  AAPL has been in the Model Portfolio because of the attractive valuation and the optionality of AAPL coming up with a new category of products and services.

Target zone is being reduced to $110 to $123.  Buy zone is being suspended.

What To Do Now?

Those long from $18.71 may consider continuing to hold and protecting AAPL position with hedges using near zero cost option collars.  These option collars are in addition to hedges on the entire portfolio.

Those holding AAPL from $18.71 and are not comfortable with hedges using option collars, may consider either reducing the quantity based on individual risk preference or hedging it by buying inverse ETF QID equal to about 20% of the value of AAPL stock in addition to hedges on the overall portfolio.

Those who own AAPL from higher prices may consider starting to scale out between right here and $105.  Consider using stops while attempting to scale out at higher prices.

Those not in AAPL stock may not consider entering at this time.

Some readers of this blog may not have access to ZYX Buy Change Alert Real Time Feed.  The following post published yesterday on ZYX Buy Change Alert on AAPL is being published below:

URGENT: REVIEW YOUR AAPL HOLDINGS BEFORE THE MARKET CLOSE

In addition there are realized profits allocable to this position from hedging program initiated on March 5, 2012 and ended on January 18, 2013  in the amount of $90. The current hedging program is profitable.

Those in the stock  may continue to hold the remaining 10% for the long-term.  It is important to note that even 10% represents a fairly large position due to large unrealized gains because the 10% is calculated based on the average buy price of $18.71.

AAPL reports earnings after the close.  There is about 20% probability that after the earnings the stock can move up about $10 or fall $15.  Even though the probability of a large down move is only 20%, investors should reassess prior to the market close their risk tolerance and consider a partial exit if their risk tolerance cannot handle  a $15 down move.

In the model portfolio, we will continue to hold the present position.

What We Know

What We Can Reasonably Predict

• iPhone sales are slowing dramatically.
• Some of the slower sales are discounted in the stock price but not all.
• Retail traders will buy AAPL stock if it goes up or if it goes down.
• Tim Cook will put a positive spin on even bad results.

What We Cannot Predict

• How the institutions will react to earnings.
• Will AAPL talk about a new category of products?

AAPL TRADE WAS NOT PUT ON THIS BLOG WHEN IT WAS FIRST INITIATED AND WAS AVAILABLE ONLY TO PAID SUBSCRIBERS TO ZYX BUY CHANGE ALERT; FOR THIS REASON, AAPL TRADE IS NOT INCLUDED IN THE PUBLISHED PERFORMANCE.

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