The technology world and Apple geeks worldwide (myself included) got their first taste of how the company contrasts under Tim Cook than it did with Steve Jobs. By now, most people are aware of Apple’s disastrous customer experience with Apple Maps on the new IPhone 5. Apple (AAPL) decided to boot Google Maps out of its iOS platform, mostly for competitive and (always) egoistic reasons. This is of course a typical Steve Jobs move. And given that this decision was probably made 1 to 2 years ago, it’s reasonable to assume Steve had approved.
The situation got so bad that on Friday, Tim Cook had to issue a lengthy apology. This is the first time that I can remember Apple profusely apologizing for one of their products. Steve Jobs would have never done this – but then this kind of a debacle would have never happened under his watch. Steve would have masterfully calculated if this was the appropriate time to give Google (GOOG) the boot, or save it for a later occasion. One thing Steve would have never done is put a crappy product out there. This is one Steve Jobs trait that Tim Cook must urgently learn – if you put something out in the market, better make sure it’s the best of breed.
Not surprisingly, the markets have thrashed Apple in the past few days, even though IPhone 5 has been doing well. Down from a high of over 700, the stock is now at 665. Is it time to short Apple ? I don’t think so. The maps issue has caused a temporary setback with user experience, but it really does not dent Apple’s short or medium term outlook. In fact, judging by IPhone sales, Apple is bound to see a rebound soon. Lets look at the Apple 1 – month chart. The area between 650 and 660 has provided a good support range at least 4 or 5 times. If it touches this level again, it maybe a good time to go bullish on AAPL.
Looking at AAPL Call Options for the Dec 2012 series with about 85 days to expiry, we can see that Call Options at the strike price of 700 are going for about $24/share. For 1 Call option contract (equivalent to 100 shares), the cost for entering this option contract works out to about $2400. If AAPL goes anywhere near 700 again in the next few weeks, this Call option would be worth approximately $35 to $40 depending upon how long it takes to get there. This translates into a nice 30% to 60% return on this trade. You could also construct a Bull call spread at strikes of 660/680 or 670/700 for a similar performance.
