Shorting Apple with a target of $250
- Thread starter retaildaytrader
- Start date
The P/E is 23 that doesn't seem like a bubble to me considering they've had upside surprises on recent earnings reports and very hot products right now. Apple action is more like the action Microsoft had when they came out with an operating system. The thing is if literally everyone is buying their products they are a money making machine. Ask teenagers right now what they own.
I suspect if they split their stock 20:1 people wouldn't think their overpriced even though that wouldn't change their real value.
To me there is far more risk eventually in something like GOOGLE it is mind boggling how much money they are making but the barriers to entry for competition can't be that big eventually they'll lose market share. The technology bubble in the 1990s was primarily due to internet startups and the idea the internet would create riches for anyone on there. GOOGLE is kind of proof the model was decent now that 99% of the garbage companies are liquidated and gone.
$250 is an agressive short term target but I can see AAPL to go down after earnings. Now everyone knows that AAPL should blow away street expectations by at least 30% do that is already piced in. So APPL might drop a good amount after a good earnings report.
FYI: I don't trade AAPL but if I had the shares, I would sell Call $320 for November on Monday and buy PUT 290 and also buy another PUT for $280 and buy a $340 Call. So I will have 4 different option positions alongwith my long stock.
Playing tops is a losers game. Only losers or degenerate gamblers do this. I remember this guy who bought a PCLN put at $300. He lost all his money.
What about Google? Up 10% in a day after earnings, your strategy would have sucked giant donkey balls.
Shorting stocks with great fundamentals on PEs in the low 20s is a mug's game. You think a game-changing cash machine business like Apple should sell for the same PE as something staid and mature like Coke? Some premium is surely justified, it's just a question of how much.
Shorting a premium stock at a 20-25% PE premium is silly, you may be shorting BELOW fair value rather than above it.
Also, everyone who compares this to the 90s should just never trade a stock again. Seriously, how can you compare the tech bubble, where things like Cisco sold for over 100 times earnings, and other stocks sold for 300 times SALES, with now - where Apple and Google are in the low 20s PE range, i.e. almost 5 times less expensive than back then. Look at the PE and earnings history of Microsoft and Dell in the early and mid 90s, that is a better comparison.
Shorting stocks like AAPL and GOOG makes sense under only three scenarios I can think of:
i) a short-term technical pattern that you have tested and seems to work. So it's just a trade, nothing to do with valuations or "hype" or anything like that, just pure technicals. Place your stop, place your profit-target, and just make a short-term odds play.
ii) if the "story" breaks down e.g. if Apple's Ipad sells like ice cream in Alaska and they have a big earnings miss, or the iPhone gets competition or an antitrust lawsuit. I.e. if there are major negative fundamental developments that threaten earnings over the medium/long-term.
iii) if valuations reach absurdly expensive levels. I wouldn't even touch AAPL and GOOG on the short side unless they hit at least a 50 times PE, preferably higher, and even then I'd want some timing or news factor on my side. Just look at AMZN, it is an inferior business yet is at a PE of 68.
Only novice traders would make the elementary error of long-term shorting AAPL and GOOG at such normal valuations without some kind of negative fundamental news. I urge you to save your cash and pick more worthy targets - CRM, AMZN, or act like a proper short-seller and find some frauds or obsolete businesses that are going under. Stop trying to make hero trades by shorting the most solid stocks in the market.
Check it out. It can happen and it can happen in bigger scale although in long term it might just look like a correction but can you handle seeing APL at $265 when you bought it at $320? In last correction price was halved. How about $160 now? all are possibilities.
FYI: I am not trading AAPL.
FYI: I am not trading AAPL.
It can also happen apple at $400 in one day
