Tech Check

Apple Investors Catch Religion?


It's been an eventful week: Bernanke claims the recession is over; Buffett claims residential real estate has finally hit a bottom; and Apple investors might finally be appreciating exactly what this company is financially capable of.

Apple shares soared to a new, 52-week high this morning, on the heels of fresh Mac sales estimates, warming rumors of a Mac tablet release date, ongoing speculation about accounting rule changes that could dramatically inflate the company's top and bottomlines, and a new, $264 target from CNBC's Jim Cramer.

I'm not going to sit here and write again the laundry list of fundamentals driving this company and its shares. Well, not yet anyway. By now, you should know them. What I will do is accentuate the 24-hour news cycle that seems to be top of mind for Wall Street today.

Maybe, a big maybe, the skeptics are finally beginning to embrace just how compelling this story truly is?

The FASB rule change is truly significant if it comes to pass. As I wrote two weeks ago, should the board change the way Apple and other smart phone makers book revenue, and turn today's non-GAAP numbers into tomorrow's GAAP numbers, the change in Apple's earnings will be dramatic. Apple won't comment on the ongoing discussions, or even when the company might implement any changes in its accounting even if FASB allows more flexibility, but rest assured that a change will come - and quickly - if regulators open the door. Maybe that has something to do with today's big, Apple rally?

Then there's the new NPD numbers from yesterday, indicating that Mac sales exceeded Wall Street estimates for the September quarter, with a 7 percent year-over-year increase. Analysts anticipated something closer to 5 percent. That all translates into another 2.8 million Macs sold, and as good as that is, Piper's Gene Munster projects the number might even be higher than that. All of this compares to the 2.6 million Macs sold in the June quarter, which was Apple's best, non-holiday shopping quarter ever as far as overall revenue is concerned. Maybe that has something to do with today's big, Apple rally?

And what about the report from a Taiwan business publication that the oft-rumored Mac tablet is not only on the way, but now has a February release date? The article from yesterday details some of the rumored specs, but it's the release date coming into focus that captured so much attention. Some analysts think the tablet could be a $1 billion revenue generator in 2010 alone, and the February release speculation only adds fuel to that fire. Maybe that has something to do with today's big, Apple rally?

Maybe the rally has nothing to do with any of this. Maybe it’s the fundamental, financial epiphany that Apple continues to perform, continues to attract new customers and expand the markets its in, grow its key revenue generators faster than the overall markets in which Apple competes, and the company continues to bank cash like no one else. It might be too much to presume that Apple's message is finally seeping into the investor consciousness out there, that it's expanding its investor base to include the naysayers in much the same way it attracts thousands of new customers to the Mac platform every day. No matter. The ones who get it are reaping the rewards and the ones who don't will look back at the opportunity that passed them by.

And what's funny is when I write these posts about Apple and its fundamentals, I get emails dispatching me as merely another fanboy, blinded by the Steve Jobs distortion field. If Apple didn't have $35 billion in cash in the bank; if Apple wasn't seeing big increases in its Mac sales; if half of iPod buyers today had already owned an iPod rather than buying one for the first time (which is the case today); if iPhone didn't continue to blow away sales projections; if the App Store suddenly stopped adding new programs and the 1.5 billion downloads thus far turned out not to be accurate; and if innovation in Cupertino was grossly exaggerated, then I'd be the first to agree with those critics.

Facts are facts, fundamentals are fundamentals, and rallies are rallies. Apple won't move in one direction forever, but it's certainly moving in the right direction, and I don't see anything on the horizon that derails the trends that got Apple here. And I am certain that that definitely has something to do with today's big, Apple rally.

Questions?  Comments?