It is time to take partial profits, especially on short-term trades on Apple AAPL and its supplier Avago.
In the case of Apple, China Mobile CHL is likely to officially announce tomorrow that it will carry iPhone. In the case of Avago, it just almost doubled its size by acquiring LSI (LSI). Professionals often surround their long-term positions with short-term positions to increase returns. The two calls herein are for short-term positions.
Opinions about China Mobile vary. My analysis detailed in Why Not To Get Excited About Apple’s China Mobile Deal showed that China Mobile may account for only $1 to $2 incremental earnings for Apple after the initial surge. As a reference, the high estimate of Apple earnings for year ending September 2015 is $56.20.
Irrespective of your opinion of the China Mobile deal with Apple, there is no denying two simple facts. First, the deal has been well telegraphed for months. The stock market is a discounting mechanism and the China Mobile news is discounted in Apple stock price.The Wall StreetJournal reported on December 9th that China Mobile will take pre-orders for iPhones. Second, the deal with China Mobile has been in the making for several years, the only uncertainty has been the timing.
Now to Avago. On August 28, 2013, I recommended Avago in my column on Forbes,Avago Closes In On New Highs With Push From Blowout Quarter . At that time Avago was trading in $30s. As of this writing the stock is at $52.90. Technically the stock is very overbought…Read more at Forbes