JAT Capital raises its position in Apple

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JAT Capital position summary

John Thaler’s JAT Capital Management’s top new positions for the quarter ending in June were Amazon.com, Inc. (AMZN), Ctrip.com International, Ltd. (CTRP), and Zillow Inc. (Z). The fund also added to its positions in CBS Corporation (CBS), Yahoo! Inc. (YHOO), Twitter Inc. (TWTR), and Apple Inc. (AAPL), while it reduced its stakes in Time Warner Cable Inc. (TWC) and Qihoo 360 Technology Co Ltd. (QIHU). JAT Capital sold its position in Vipshop Holdings Ltd. (VIPS).

JAT Capital also took an activist position in The Madison Square Garden Company (MSG), according to the fund’s 13D filing in September.

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JAT Capital added to its position in Apple Inc. (AAPL). The stock accounted for 1.55% of the fund’s portfolio for the quarter ending in June.

Apple overview

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Apple is based in Cupertino, California. It designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players. It also sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

Apple’s products and services include iPhone, iPad, Mac, iPod, Apple TV, iCloud, and the iOS and OS X operating systems. Apple also has a consumer and professional software applications portfolio. It has a variety of accessory, service, and support offerings. Plus, the company sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store.

Carl Icahn believes that Apple’s stock should trade higher

In a recent statement, activist investor Carl Icahn said that Apple’s stock is dramatically undervalued and is actually trading at half its intrinsic value. He believes that Apple’s stock should be trading at around $203, much higher than the current stock price of $98.

Icahn said his rationale is that the iPhone will continue to hold a significant market share in the premium smartphone segment, and it will continue to retain its loyal customers. He’s also bullish about Apple’s new services such as Apple Pay and Apple Watch. For more on Icahn’s views, read Why Carl Icahn thinks Apple stock is dramatically undervalued.

Apple unveils new products

Apple unveiled new products at its September event, including two new handsets and the Apple Watch. The new iPhone 6′s screen measures 4.7 inches. The iPhone 6 Plus’s screen measures 5.5 inches. The watch will start selling at $349 and will be available in early 2015.

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The company also plans to launch a new payments solution, Apple Pay. It’s expected to be an alternative for physical wallets, credit cards, and other mobile payment services. Apple said that Apple Pay supports credit and debit cards from the three major payment networks—American Express, MasterCard, and Visa.

Reports of security concerns over iCloud accounts, as well as the recent bendgate controversy, have both impacted Apple’s stock this month.

Analysts are bullish on Apple

Despite these issues, analysts are bullish on Apple’s stock. Morgan Stanley analyst Katy Huberty believes Apple’s stock price is set to surge on the back of strong demand for the iPhone 6 and iPhone 6 Plus.

Strong iPhone, Mac & App Store sales drove 4Q revenue and earnings

The company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion. This represents $1.42 per diluted share. In comparison, Apple reported revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the same quarter a year ago.

On the earnings call, the company’s CFO said that strong business performance drove earnings per share growth of 20%, as well as a record $13.3 billion in cash flow from operations in 4Q.

Apple’s CEO added, “Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus, with amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple’s strongest product lineup ever. We are also incredibly excited about Apple Watch and other great products and services in the pipeline for 2015.”

The next part of this series reviews JAT Capital’s increased position in Yahoo.

 

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