Apple Looks Great but I am selling with huge gains now

Apple just reported fantastic number. It had quarterly net income of $818 million, or 92 cents a share, up from $472 million, or 54 cents a share last year. Its numbers beat analyst consensus by 20 cents. The stock is understandably way up and it is closing in on my $150 sell target.

I am not selling because my sell target has been reached (about 3 years ahead of schedule). I am also not selling because I think that this is a little bit of a short-covering induced blip and I expect the stock to fall next week. Rather, I am a long term investor and I am calling it a gain here for fundamental reasons.

Here is why:

Revenues, which rose 24% to $5.41 billion, were mainly driven by a 36% jump in Mac sales (they sold 1.8 million, well in excess of estimates). Mac sales have done well, but are unlikely to grow dramatically higher as the price differential between a Mac and HP or Dell is just too great for iMacs to really take off. As Ubuntu and other Linux-based systems become viable, Apple's growth from those frustrated with Microsoft will peter out. I think that Macs will always be a specialized product for artistic sectors. Apple's lost the battle 20 years ago.

IPod sales are not growing at breakneck speed any longer. While Apple does have a hell of a franchise here, there are competing formats and competing players that offer more value for the money. Apple's continued growth is dependent on much greater international growth and this is something that Steve Jobs has never done well.

It is impossible to reconcile Apple's reported sales of 270,000 iPhones with ATT's of half of that. Now that I have used the device I really believe that it is nothing special in spite of my previous articles and posts on this topic on this site. I don't expect Apple to meet their projected sales numbers on this. The device simply is not that compelling.

Thanks for a wonderful run, Steve, and I have done tremedously well with your stock. The time has come for me to sell and take my profits.