After closing out 2 trades last week, I can now get back to opening new trades. The trade that I am entering today is one that should not surprise regular readers and are even more obvious to premium members. I wrote recently about Travelzoo and how its recent movements have puzzled me. The rise of Travelzoo seemed exaggerated but it was so volatile that trading it was too risky. But the stock seems to have calmed down and has not had any 5% variations in the past few days so we are ready to make this trade.
Long Apple (AAPL)
Apple (AAPL) has been flying high again and despite now being the biggest tech company in the world, has been able to keep up a fair amount of growth. How? Through its Iphone business of course but also thanks to its booming Ipad. Estimates are now that the company will sell 30 million units next year which would generate as much revenues as Apple made in 2008 with all of its products. Amazing isn’t it? One of the big things in my opinion is that Apple is one of the two big players in the mobile industry which is turning into a huge business. Add to that domination in the tablet market and increasing market share in the desktop industry and you can see how well things are going for Apple. Another trend that seems to be working for Apple (AAAPL) is businesses that have started adopting the Ipad…!
It also is great news for Apple investors that Verizon (VZ) will be selling Ipad’s as that increases the probability of seeing Verizon offer Iphones. Google’s Android is doing well for many reasons but one of the big ones is that it’s available through all carriers in the US. It just does not make sense for Apple to continue to force its users to use AT&T for the Iphone.
Short Travelzoo (TZOO)
I have discussed Travelzoo as I mentioned but the basic premise is that the stock is trading at such a high P/E for next year that it’s as if this was a high growth stock. I do not see any signs pointing to that. They did generate a lot of buzz when they announced they would be running similar promotions to what Groupon has been doing. But it’s not clear to me that it’s that different from what they were already doing. Also, traffic based on estimates from both Alexa and Compete.com do not point to any major hikes. See the charts just below:
And you can also take a look at the numbers regarding this trade here:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Trend Analysis
TZOO Travelzoo Inc 27.18 0.39 52.27 33.98 121.16 16.28 4 90
AAPL Apple Inc 314.74 9.22 23.70 17.51 49.36 14.44 4.82 100
One thing I do not love about this trade is entering the day that earnings will be reported. There is a lot of speculation priced into the stock and it’s unclear how that will play out. I would have preferred to make this pick after the earnings but to me it clearly remains the best possible trade to be done at the moment so I will go head first and trust that it will pay off…. Apple is reporting earnings tonight after hours, so at 4PM or so.
- Verizon (VZ) dividend analysis
- Quick news – June 22 2010
- Mighty Apple (AAPL) generates billion dollar business in a few months…
- Quick news – May 28 2010
- New trade: Long Apple (AAPL) & Short Research in Motion (RIMM)