Wanna bet against Steve Jobs and the iPhone?
Unless you've been living in a cave, you've probably been hearing (and seeing) a lot about the iPhone, the Apple handset.
In New York, people are camping outside the Apple Store hoping to be the first one to get their hands on it:
So as a trader, maybe you think it’s time to go long on AAPL and ride the “iPhone madness”, right? Think again.
Yesterday, I came across an article in the WSJ with a surprising conclusion: AAPL may be overvalued!
To reach this conclusion, they compare AAPL’s handset business with Nokia’s (NOK):
Since the iPhone was unveiled on January 9th this year, shares of AAPL went up from $85 to over $120. This has increased AAPL market cap in $34 billion. That means investors are valuing the iPhone business in $34 billion. That’s a lot of iPhones! But AAPL is expecting to sell only 10 million iPhones by the end of 2008.
Compare this to Nokia (NOK), who is expected to sell 550 million phones in the same period, and has a $108 billion market cap.
So NOK sells 55 phones for every iPhone. Yet its market cap is only worth 3 times as AAPL’s iPhone business. This doesn’t make sense in my book.
So what do you think? Should we short APPL and bet against Steve Jobs? (I never thought I would say that!)
To Higher Returns,
Manny Backus
The Stock Trading Whiz Kid
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