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The Street has completely misread APPL’s most recent earnings announcement.

Christmas and Chanukah came early this year. The Street has completely misread Apple’s (AAPL) most recent earnings announcement, hit the stock a bit and now we have the buying opportunity of the year – maybe the decade.

What Apple announced – they missed. They missed revenue estimates. They missed profit estimates. What Apple did not need to say. “The whole world was waiting for the new phone, they did not buy as many of the old phones we are sold out of the new phone and now, by the way, we have a free phone for low end users.”

The company beat on iPad sales; they beat on Mac sales; they beat on margin expectations. The physics major and engineers turned analysts who need to justify their spreadsheets looked at the numbers and sold or said do not buy. Thank you. An early holiday gift.  (See my recent article on “Trading the Market Madness”).

Time to sell or time to buy? The iPhone worrywarts need to consider this –a recent survey by ChangeWave Research/451 Group showed enormous pent up demand for eh 4GS, the phone is sold out. But that is a response to a short term worry. What about the longer term?

Apple is the world’s dominant brand in consumer electronics. So they have tremendous market share and have no room to run, right? Wrong.

  • The world market for cell phones of all kinds in 2012 is estimated to be 1.7 billion units. Apple’s share estimate? 110 million units, 6.5% share.
  •  The world market for tablets in 2012 is estimated to be 72 million (JP Morgan estimates), with Apple selling 45-50 million, a 62% to 69% share. Wait. I look at the market as tablets plus their “displacement equivalents” – net books and very low end laptops increasingly displaced by tablets – and I find that market to be roughly 200 million units. So Apple has only a 25% share.
  • The world market for computers in 2012 is estimated to be about 440 million units (Gartner Group). Apple sold 4 million Macs in Q3, let’s say they sell 25 million in 2012 – that is a 5.7% share.

Think about it –the world’s best consumer brand, the electronic products with the highest level of consumer satisfaction and the largest market cap company in the US has 6.5%, 25% and 5.7% share in it’s target markets – with margins almost double their primary competitors.

Buy it – I own it – and I write calls against it all the time. Before the announcement I sold calls, bought them back when the stock moved down, averaged down the net cost of my shares roughly $6 a share and will do it again. And again, sometimes pulling cash out. Maybe to buy a new iPad for my wife this Christmas. Unless they are sold out.

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