Tuesday, January 26, 2010

1/26/10 Midday Report: An Apple a day will keep the recession away (especially if it's one of those new tablets)

The market is bouncing around after Apple put up a ginormous quarter and is likely to announce their tablet on Wednesday while the global economy still sputters.  In macro news, US consumer confidence rose to 55.9 from 53.6 and we all know how important it was to break that 55 barrier (actually, I'm just kidding, I don't have a fucking clue as to the difference between 53.6 and 55.9, and I am guessing no one else does either, but bigger is better, just ask Keeley Hazell).  Also in the US, the Case-Shiller home price index was either up or down, again depending on which news source you use.  According to Bloomberg, home prices rose sequentially in November by .2% while according to the Wall Street Journal, home prices declined .2% sequentially in November.  As always, our tie breaker is the NY Times because the irony of having a newspaper noted for their lapses of fact act as our determining factor makes me giddier than Charlie Sheen at a hoedownAccording to the NY Times, home prices rose by .2%, so woofuckinghoo, home prices were slightly up, or not.  I think the moral of this story is that home prices remain stagnant and you can't believe everything you read, unless it is about Money McBags' way with the ladies, and then all reports are 100% accurate, and delicious.

In international macro news, Standard and Poor's lowered Japan's outlook to negative and warned that they might cut Japan's debt rating if Japan can not trim their mounting public debt and reliance on Pokemon cards to spur their economy.  Seeing as how the S&P credit ratings analysts did such a good job assessing US financial institutions before the biggest failure of the US banking system since the Great Depression (and yes, that is sarcasm), Japan yawned at the reports and went back to their game of Dance Dance Revolution.  In Europe, the UK announced that they have momentarily come out of their longest recession since the 1930s as GDP rose .1%, or by its more familiar name "a rounding error."  The growth disappointed most Brits, though not as much as their disappointment in General Cornwallis or dental floss.  Weighing most on the global economy though continues to be China where some banks are said to have been ordered to stop lending for the month.  With China threatening to make their monetary policy tighter and already less rigid than Joan Rivers' face, the global economy may be in for a bigger slow down than the current market implies.  Be wary of what is going on in China as they are currently driving the global economic rebound so if they put on the brakes, we all may get Chris Henry-ed.

In terms of stocks, the big news is that Apple demolished numbers like they were auditioning for the lead role in a Monsters of Cock video.  They earned $3.67 a share, up from $2.50 and had $15.68B in revenue, which was 32% topline growth.  This was led by Mac sales which were up 33% and grew at twice the rate of the computer market thanks to a 70% increase in iMacs.  Sure Apple did an accounting switcheroo from non-GAAP to GAAP which essentially pulled iPhone revenue forward by about $2B or so, but it's not like Apple has ever had other accounting issues so there's probably nothing to see here (though there is something to see here).  Some analysts were disappointed that the 100% growth of the iPhone was a bit below expectations, but being disappointed in 100% growth is a bit like faulting Brooklyn Decker for having bad breath for like one second every few years (though even her bad breath must smell of gold).

In small cap news, ZAGG continues to get pulverized, though it is unclear that there is any news, except for perhaps people realizing that this one trick pony's trick may not be that hard to repeat, like walking or dividing by 1.  As the market for smart phone covers has fewer barriers to entry than Paris Hilton's pants, ZAGG's business model should remain challenged.  EBIX also continues to trade down making Money McBags glad he sold his EBIX holdings to avoid the attack of the shorts there who may or may not have something on EBIX's accounting.  Also RICK has been selling off with the market but Money McBags missed a key announcement from them last week (unfortunately the announcement did not involve the words "free," "champagne," and "room").  Last week RICK said their high end spender is coming back.  CEO Eric Langan said: "What we are seeing is customers are spending more money on higher-ticket items. For example, last year, guys who were (used to) drinking $1,000 bottle champagne were ordering the $300 bottle.  Now, we are back to selling... those premium bottles of wine and champagne again."  In that same interview, RICK forecast fiscal 2011 to have 20% growth to $100MM of revenue.  They also expect operating margins to start expanding in Q2 and op margins were at 17.8% last year after being at a 26% the year before.  So let's say RICK can earn $100MM in fiscal 2011 and their operating margins go back to only 20%.  That is $20MM of operating earnings and then subtract out $3MM of scheduled interest payments and tax them at 34% and you get around $1.20 per share for their year ending September 2011.  They are currently trading less than 10x that number and margins could be a lot stronger than 20%.  As always, Money McBags is aware that there is a taint on this stock (pun intended) as they are just one rusty trombone away from being in serious trouble, but as long as they can keep the ladies walking that fine line of legality and awesomeness, this company should have improving financials and strong growth.  Money McBags is an owner of RICK and this is one time where he tries to do as much primary research as possible.

1 comment:

Anonymous said...

My friend and I were recently discussing about the prevalence of technology in our day to day lives. Reading this post makes me think back to that debate we had, and just how inseparable from electronics we have all become.

I don't mean this in a bad way, of course! Ethical concerns aside... I just hope that as memory becomes cheaper, the possibility of downloading our brains onto a digital medium becomes a true reality. It's one of the things I really wish I could encounter in my lifetime.

(Posted on Nintendo DS running [url=http://knol.google.com/k/anonymous/-/9v7ff0hnkzef/1]r4i ds[/url] DS ccPost)