Unshort Apple

A few weeks ago, I spent time looking at Apple following the release of the new iPhone. I wrote that I thought expectations around the phone were too high, that it would disappoint, and that we might have a chance to short AAPL stock ahead of such disappointment. I made it clear that I was watching the stock as a potential short.

Then, in my July 13 article, Dave Van Knapp reinforced the notion that it was not yet time to short AAPL when he wrote, “It’s going up and has been going up for about a year. Many people believe it is overvalued already, and has been for some time, but the fact is that it’s been going up anyway.”

Dave and I looked pretty smart until rumors of slow iPhone hook-ups at AT&T; sent AAPL down 6% on Tuesday. “Still watching?” asked one reader. “You may have missed your chance.”

It sure looked that way. In the first two days it was for sale, the iPhone sold just 270,000 phones. As predicted here, that was fewer than several analysts had expected. When rumors of slow hook-ups at AT&T; became reported fact that only 146,000 units were humming on the network, observers far and wide heard the sound of a ship’s horn departing the dock. The time to short AAPL, many speculated, was already behind us.

However, my decision to watch rather than short immediately, and Dave’s observation that there’s clear momentum behind AAPL, looked good after hours last night when Apple reported results for fiscal year Q3.

Apple is on fire!

You don’t want to be short ahead of this kind of report:

• Its profit margin came in higher than expected, at 19.2%.
• iPod sales rose 21% from a year prior.
• Macintosh computer sales rose 33% from a year prior to 150,000 units — the most ever sold in a single quarter.
• Sales in the 185 Apple Stores rose 33% from a year prior to $915 million.
• The company will open 12 new stores this fall to end the year with 197.
• The company still expects to sell 10 million iPhones next year.

Pre-open this morning, AAPL shares are up some 8% and look set to break through $150 today, which would be a year-to-date gain of 77% and a 12-month gain of 135%.

The last few weeks have been a great time to not be short AAPL. Let the watching and waiting continue.