As you watch the markets melt, you may wonder why AAPL seems immune to the carnage. I mean even with the explosion at the Foxconn plant in Chengdu, where the iPhones and iPads are made, they've barely been able to push AAPL down .7 percent as the DJIA falls 1.35 percent and the Nasdaq falls 1.75 percent.
As I break down the stories beyond the obvious risk off trade, and delve deeper into the catalysts, for up or down movement in AAPL you do get an outlook for this company that is far different from that for the broad market. Below I've broken down the news and why AAPL is not feeling as much pain:
Apple Stores' New Look: Speculation was rampant for weeks as to why vacation days were canceled for Apple Store employees, but now we know that over the weekend AAPL upgraded their retail outlets with better displays and a new product labeling system. Visitors to the stores report special iPads acting as interactive labels--even for iPads and smaller iPods. The iOS app was refreshed as well and built-to-order Macs now available using the app.
I was just in an Apple Store a little over a week ago and must say it was one of the best shopping experiences I've ever had. The salesman was knowledgeable, friendly and helpful. The sale went from his iPod Touch to the stocking area and computer was brought up, scanned by the iPod Touch and then my credit card run through the same iPod Touch. Amazingly seamless and fast and that was at the "old stores" not these new look and feel stores!
Cloud Streaming Music: Apple has struck deals with three of the top four music labels and this news could crush competitors as the licensing agreements will enable Apple to launch a fully licensed cloud-music service to rival unlicensed offerings of rivals Amazon and Google and a host of smaller players. Thus through iTunes consumers could access their digital music collections from mobile devices like the iPhone, and do so without the stigma of stealing and the associated legal worries.
While we are left to speculate what Apple will do with this service, it seems painfully obvious that they intend to roll out a digital music subscription service, creating what CNET called a "jukebox in the sky". I suspect if AAPL is as successful in this offering as they've been thus far with iTunes, this should be a multi-billion dollar winner and assure they remain firmly atop the entertainment mountain.
Explosion at Chengdu Production facility in China: Last Friday Foxconn, who builds Apple's products in China, had an explosion at its Chengdu plant. Initial reports were that the explosion was due to aluminum dust, which can be highly explosive. Apple has stated it's assisting with an investigation.
From the China Times: "Sources said the explosion at Foxconn Technology Groups Chengdu plant did not affect the assembly line of iPad. Foxconn assured major suppliers at an online meeting yesterday that under the principle of orders placed and goods delivered as usual, the production of iPad 2 would not be delayed and related iPhone devices and new iPad products would still be in mass production in the third quarter."
Of the three, this is obviously the catalyst that feeds the bears rather than the bulls, but thus far the production does not seem to have fallen off significantly, and so long as Foxconn can ramp up at their other facility to make up for any shortfalls that could occur, this seems like a very minor negative catalyst.
I will note for you that our volatility chart for AAPL shows only a modest increase in the weekly options volatility and no increase whatsoever in the June, July or August implied volatility for AAPL options. That does not mean AAPL will not go down if today's sell off keeps going, but there is very little fear that AAPL will move as quickly to the downside as the market.
- Analyst: Chinese Plant Explosion Won't Hurt Apple's iPad Supply
- New Dynamic Gripping Market, Strangling Bulls?
* Jon Najarian is co-founder of optionMONSTER.com, a news and information site for options traders
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