Apple, Second Thoughts on Taking Profits

Apple-logoThanks to it’s meteoric rise in the last year, Apple is now Parchayi and my largest single investment. I was considering taking some profits when it crossed $250, which it did today after the monster quarter of nearly doubling earnings to $3.1 billion ($3.33/share) from 1.6 billion ($1.79/share) same Q last year on a 50% increase in revenues to $13.5 billion from $9.1 billion last year.

The iPad did not start selling in the last quarter and is not reflected in the above numbers. Mac shipments rose 33% and iPhone sales were 8.9 million (worldwide), a lot more than expected and even more than the holiday quarter sales of 8.8 million.

Apple doesn’t comment on rumors but it seems like the question to ask about a CDMA iPhone on Verizon is  not if, but when. Also with the next iPhone (iPhone HD?) in the works with a rumored release in summer and iPad there is no telling what earnings will be like next quarter.

Apple says that margins will be lower next quarter thanks to lower margins on the iPad and lower margins on “future product transition”. That can only mean the new iPhone. Margins are generally always lower on newer products until parts become cheaper as volume increases.

I’m now reconsidering holding on until Apple hits $275 to sell about a third of my holdings. The next iPhone seems to be finally catching up with other phones (HD2, Droid, Nexus One, Incredible etc.) in many hardware specifications where it was lacking such as flash for the camera, higher resolution screen and more.

There are things I don’t like about Apples ecosystem such as it’s fight with Adobe, resistance to Flash, arbitrary app store policies etc. but these don’t seem to be putting a dent in the adoption of the iPhone or iPad. Forced use of Macs to develop for the iPhone is another thing I don’t like but as far as Apple goes that is a great way to sell some more Macs.

For the next quarter AAPL’s guidance is $2.28 – $2.39 a share on revenues of $13 billion – $13.4 billion. Apple is known to provide extremely conservative guidance and has beat its guidance for as far as I know at least five years (don’t quote me on that). Analysts were expecting at $2.70/share on about $13 billion. It is quite likely that Apple will handily beat both estimates unless iPhone sales drop significantly on expectations of the launch of the new iPhone.

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