Tuesday, July 23, 2013

Apple (AAPL) - Earnings Preview Reveals Lots of Information; But There is No More 'Old AAPL' -- That's Not Good or Bad... It Just is.

AAPL closed Monday trading at $426.31, up 0.3% with IV30™ nearly unchanged. The LIVEVOL® Pro Summary is below.

Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

This is an earnings note, or really, a pre-earnings analysis. I have written extensively about AAPL and you can read any of those recent posts below by clicking on the titles:

4-18-2013: Apple (AAPL) - This Just Isn't the Company it Used to Be... And it Never Will Be Again.

1-23-2013: AAPL - "Just the Facts Ma'am" -- Well, that Supports the Opinion: "Everything has Changed. The Old AAPL is No More."

12-10-2012: AAPL - Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet.

12-5-2012: Apple (AAPL) - Have We Moved into a Totally New Volatility Paradigm for This Company? Has Everything Changed?

The point of all of the stuff above, although I used a great deal of detail, was simply to say that AAPL is a different company than it once was. The price drop and volatility movement show that -- it is tautological.

Now we look at the stock on the day of its earnings release, and we will see yet again, that AAPL is a different company. It is no longer seen as the technology innovator of the world. It is no longer seen as a stock driven by a new product release. It's a $400 billion Goliath, that pays a hefty dividend and just ain't all that sexy anymore -- at least compared to the old days.

Let's start with the two-year Charts Tab, below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

So, we know the stock story.. It went up a lot, then it went down a lot, then it stopped doing both and has been hangin' near $400 for a while. That quiet period of late is not trivial -- it's actually the meat of the story. But it takes the option market to fill in the rest.

Let's turn to the two-year IV30™ chart in isolation, below.

The blue "E" icons represent earnings dates. I have circled the IV30™ levels for the prior seven earnings cycles and as of the close on Monday. Then I've drawn that horizontal line from the current vol level back in-time so it's easy for us to see how depressed the current vol is all prior seven earnings cycles. In fact, on an annual basis, as of Monday's close, AAPL's IV30™ is in the 38th percentile -- so it's depressed to it's own history over the last year by a fair amount (the 50th percentile would be the median).

So what? It ain't about the iPhone 926 or the iPad 1456 or the iGlases 1 or whatever... This is a stock that pays a 2.8% dividend, has announced a stock buy-back and has and HV30™ of 20.27% and an HV60™ of 22.14%. The HV180™ (which covers 180 trading days or ~9 months) is 33.20%. The stock is less volatile and clearly is using it's cash in ways outside of product development (exclusively). There is no more Steve Jobs, and so there is no more old AAPL. That's not good or bad... It just is.

Finally, let's turn to the Options Tab, for completeness.

As of Monday's close we can see that the implied move in the options off of earnings is ~$20 or a little under 5%.

This is trade analysis, not a recommendation.

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