Pros Share Plays After Apple’s Stellar Earnings

Apple posted better-than-expected earnings Tuesday, giving the “Fast Money” pros several ways to play the results.

In the big picture, Guy Adami of Drakon Capital saw the move as support for a move higher in the S&P 500.

“The market overall really needs to respond to this,” he said, looking for a level in the 1,350 to 1,370 range.

The S&P closed down 0.1 percent at $1,314.65.

But is Apple a buy?

Adami’s short answer: Yes. With a time frame of a year, the stock held upside potential.

“If you’re more in the trading camp, I think you’re clearly, at this point, late,” he said.

Trader Keith McCullough agreed.

“Tomorrow, we don’t buy apple,” he said. “If you missed it, you missed it.”

But McCullough also liked the stock’s long-term prospects.

Apple: A Value Stock or a Growth Stock?

“Now Apple, whether you think it’s a value stock or a growth stock — and it is a debate as to which — you don’t buy it tomorrow,” he said. “But you have to fundamentally recognize what Guy is saying, which is, the upward thrust is to the prior closing highs in April in the S&P 500, which is pretty close to 1,363.”

To the value-versus-growth question, options trader Mike Khuow of Cantor Fitzgerald had a clear view.

“It appears, at the moment, to be both,” he said.

Trader Karen Finerman was in the value camp.

“It depends how you think the arc of earnings will go in the future,” she said. “But off of the foreseeable six quarters or so — cheap.”

Finerman also chided the company for “terrible capital allocation.”

“You know who should buy Apple is Apple,” she said. “Think about what the earnings would be had they been on a lower base.”

Shortly after her comments, Apple announced that it would put its sizable cash reserves — $97.6 billion — to use, but it did not specify how.

Apple’s cash reserves were greater than the market capitalization of 474 companies in the S&P 500. The company was also poised to open as the world’s largest company in terms of market cap if the stock held at $449 per share or higher.

Second-Derivative Plays

Adami said he liked Qualcomm as a downstream trade.

“Here we are now pushing toward $60,” he said. “It needs to get above $60 and hold to get to the next level.”

Trader Joe Terranova liked Apple suppliers Cirrus Logic, which manufactures sound processing circuits, and Broadcom. “I still do not like Nuance Communications,” he said of the company behind Siri.

“I think by Friday if Apple is still north of $450, I think you do have to buy Apple,” he added.

Afraid to go that route?


“Puts are cheap enough,” Terranova offered.

Colin Gillis, an analyst at BGC Financial, maintained a “hold” rating on the stock and said he would review his price target of $450 per share.

Gillis noted increasing competition from Samsung in the smartphone and tablet markets, Google’s acquisition of Motorola Mobility and Amazon’s popular Kindle platform as challenges for Apple.

Plus, there was the issue of cash reserves.

“That cash on the balance sheet is more than any company in their right mind could ever possibly deploy, so it’s got to come back at some point via dividends or stock buybacks, and I think most people know that.”

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Trader disclosure: On Jan. 24, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Guy is long Citigroup; Guy is long (GS); Guy is long (INTC); Guy is long (AGU); Guy is long (MSFT); Guy is long (NUE); Guy is long (BTU); Karen is long (JPM); Karen is long (BAC); Karen is long (PLCM); Karen is long (IBM);

For Karen Finerman
Karen’s fund is long (AAPL)

Karen’s fund is long (JPM)

Karen’s fund is long (PLCM)

Karen’s fund is short (SPY)

Karen’s fund is short (MDY)

For Keith McCullough
No disclosures received

For Mike Khouw
No Disclosures received

For Colin Gillis, BGC Financial
No disclosures

For Michael Burns, Lionsgate
No Disclosures

For Don Bubar, Avalon Rare Metals
No disclosures

For Matt Hougan, Index Universe
No disclosures with wires.