New products, possible Verizon deal expected to boost Apple stock - Page 2

Yes, that's what I meant. Pardon my poor grammar.

Bingo. APPL is a safe heaven for large institutional investors, usually Mark to Market valuations of such funds benefit from stable tech stocks that don't give dividends. APPL is usually found swilling around in moderately large mutual fund portfolios - large cap funds may have up to 2 - 3% APPL in them. Around 70% of APPL stock is held by such funds, around 25% or more is going to be members of the Apple board, with probably only a couple of percent held by people like you and I.


That's not quite true, if only because such a low price would make them vulnerable to a takeover. Apple would almost certainly start an aggressive buy-back scheme if the price dropped too low.

I really can't believe you stated the above. Think about it Apple has a back to school program promoting it's laptops by offering an iPod with the system. Then shortly there after Apple comes out with what might be the ideal student laptop and the keep the special offer in place. Then you sit here and imply they aren't doing enough!!!

Really I don't get it at all. Frankly out of all the vendors a student has to choose from nobody has been as agressive as Apple. Maybe I'm missing something if so point it out but other wise I think you need a perspective change.


Dave

I understand quite well. I've been investing since 1963, when I was a kid.

I'll put my success in investing against yours any day. It doesn't matter what you do.

My biggest concern is programmed trading, and unfair peeks at trades of others.

If you understood it, you would not have been so quick to shoot down what I said, unless you assumed I was just another internet idiot with nothing to say. Surely though someone of your age and experience would not assume something like that, would they?


Agreed, it's concerning. Having said that, The last project I worked on involved a High Frequency Algo Trading platform and the interesting thing is, most of them trade fairly flat, making money on the tiny peaks and troughs intra-day whether the trend is up or down. The actual impact on long-term prices is usually negligible in these cases. Some platforms are different, but the ones I've worked on have a zero or near zero position at COB.

Apple analysts know the same and you or me, only they are paid to summarize the site for those who don't have the 10 seconds to read it. How do I get their job? Why do they get paid for the effort of the editors here?

YES
where is all the meat to this slim tale of zero. Where is the verizon part ???

You made some pretty quick and big assumptions about me, and you know noting about me. Why should I assume that what you say means anything to my well used methods?


That's usually true. But there are at least two concerns right now. First is that the NASDAQ is building a vast computer center in NJ for this very reason, and inviting big companies to take part. That's a concern.

But it's not even the one that I'm most worried about. It's just being done as a result of the methods being used that are what I'm worried about.

One is the "peeks" that we're seeing in some of these operations. Those 30 millisecond looks at trades that are about to be made by others is a major worry. I don't like, and neither do others, that a privilaged few can get that advantage.

And now that programmed trades are 90% of the business, it's a problem. humans simply can't interact quickly enough when problems occur from this, and if you are in the business you know very well about the instances that have occured. This will happen more often, and the problems will escalate.

So while this programming works when matters are stable, when something happens that is not accounted for i the programs, and there are plenty of things that are not, problems occur at such high speeds, that the only thing that can be done is to try to clean up as much of the mess as is possible.

Long Term Capital claimed that their geniuses had everything programmed in, and that they were taking little risks. Well, we know what happened there.

What was the name of the airline that had it's entire market value wiped out in a few moments? Was it AA? That never got entirely fixed. And what about all the small investors whose stock was sold at large losses? Most of that was NEVER straightened out.

I'm not the only one concerned about this. There are many in the industry who are, and they've written about the dangers.

This kind of opinion is always amusing. I am always curious to hear how someone knows which bet is the "best bet," especially when they claim to be "certain." Does this advice come with a money-back guarantee?


Not really. If the stock price was decimated, it would be because investors viewed Apple's business as being worthless, or less than worthless. You simply can't evaluate these things in such a complete vacuum. Apple's board doesn't worry about stock price on a daily, weekly or even monthly basis, but you can bet they are concerned about it over the long haul, if for no other reason than the number of stock options which they and the top executives in the company are granted as compensation.

If you bought apple 7 yrs ago and can hold apple for 10 more years you will be very very happy . MANY OF US FAN BOYS DID .

There is a 2.5 to 4 billion person market that have not yet matured to be a part of the apple revolution .
india and china pakistan 1/2 of russia on and on.

So apples tired old ipods lines will still be selling in the scores of million multiples for years to come.
In china or india or singapore or indonesia or south africa. All great young under-served markets.

For example older brother buys a pod and then gives that to his younger bro and buys a new one . and if there are 4 to 6 kids in a family then you get my point about un-tapped markets growing up in 5 to 9 yrs. With incredible sales potential .

And apple can sell them much more than just iphone -nano's 5 yrs from now .

Apple in a 10 yr hold is very cheap at todays prices.
10 yr hold.

I'm actually not a fanboy. In previous years I held Apple until I did very well with it, and dropped it.

There's still that possibility. If they were to drop the capital gains tax I would likely sell most of it and wait the 30 days before deciding whether to buy it again. But I am heavily invested in it.

True, there may yet be even more severe repercussions to come from the actions taken by the Fed and Treasury. One school of thought predicts hyper-inflation and a dollar crash. There are many scenarios, but only few people in charge of pushing through policies that have historically prolonged recessions.

Apple's profit non-GAAP is growing at much more than 10%, and this in a market that is about to EXPLODE. Add in the fact that even Apple's higher-priced computers have kept their head above water during a wicked recession, and it doesn't take a rocket scientist to figure on insane growth once the recession ends.

Conclusion: Apple will not be dead money for long. Not by a long shot.

Thompson

Makes me wonder why Apple even needs the forces of the market to screw up the value of their company... they should buy their stock back and go private.

It's the law of large numbers. Apple's market cap is so large that it is impossible to grow at past high rates. The tablet will probably be a big hit and iPhone will take more market share than sj dreamed of a few years ago but I think the stock will languish.

The desktop and laptop market is dead as a growth engine. Even Microsoft saw that years ago.

To clarify, I meant that Apple typically has introduced new products AFTER the season has passed. And since the hummingbirds are all over the notion of some kind of iTablet about to make it's debut, it would be too late for back to school. That is all.

One thing I've wondered about Apple (and about Microsoft and Google, for that matter)... with the power of all of those brilliant engineers and programmers working for them, how is it that they have never managed to create their own stock trading programs to challenge the computing firepower of a Goldman Sachs, for example? It's like they are only using a tiny percentage of their brains!

The logic makes my brain hurt.

What does "market cap" have to do with earnings growth potential?

Answer: Not one damned thing.

Uuh... he actually makes an excellent point.

It is really as simple as 'the larger you are, the harder it is to become larger by the same multiple.'

For example, it is far easier for a $1.65B market cap company, given a particular growth rate, to become a $3.3B company, than it is for a $165B company to become a $330B company, since it is difficult to achieve the same growth rate in the same time frame when the scale is so different.

At some point, your sheer size starts to work against you, and you start to revert to the mean.

The first problem is, you'd have an awfully difficult time predicting when this will occur, so it's fundamentally a predictor of nothing. Second, market cap isn't really a measure of anything but investor sentiment at any given moment in time. Not much more than six months ago, Apple's market cap was half of what it is today, so by that measurement, Apple has doubled in size in just the last few months. Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits.

So even by this arbitrary rule, and a meaningful measurement, what Apple has accomplished in terms of EPS growth over the last ten years has to be considered something akin to a mathematical impossibility. But it happened.

What does tell you about the future? Absolutely nothing.

You've made a lot of pretty wild (and unsubstantiated) statements so far, and I won't respond to most of them - I am sure I'll have more opportunities!

But I did want to address a few points in just this one small post of yours.


What is a 'safe heaven' [sic] for large institutional investors? Care to explain? And in what way is Apple a safe haven? How does mark-to-market accounting 'benefit' from stability? Surely, that depends on whether the market is rising or falling? And, in what way is Apple a 'stable' tech stock? Using what metric/benchmark? And, what is the connection between stability in tech and non-dividend payments?


What is a stock that 'swills around?' What is a 'moderately large mutual fund?' 2-3% of AAPL, meaning 2-3% of their fund, or 2-3% of AAPL? And, if the former, do you know that tax laws encouraging prudential diversification require you hold no more than 5%? So, why would be surprising or unusual? Is it different for any other major tech stock?


Is that any different from that for any large tech company? In what way is Apple different? Care to tell me what the % institutional holding for Microsoft is? Or Intel? Or HP? Or Dell?


This one statistic alone gives away the fact that you are an utterly clueless bloke, blowing smoke. Care to provide a cite?


'Me.' (Wording issues aside, care to provide a cite to the actual data)?


Please stop already with your utterly inane, unsubstantiated, overblown, under-cited assertions.

You may wish to mull over thus basic truism in finance: The value of a share is simply the sum, from today to some (fairly far away) future point in time, of a set of expected future cash flows to equityholders discounted back to the present at an appropriate cost of equity. Period.

When you make a statement such as "Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits..." it betrays to me that you have trouble with some basic concepts in finance. If you'd like me to back up what I am saying, I could give you, for starters, say, a half-dozen cites. And, they would be no more than basic, well-known, widely-accepted, finance textbooks. (And if you really push me, I'd like to give you the actual Chapter cites too, but that would have to be tomorrow - I am going to turn in after this post.... yawn...)

And, fwiw, Apple's 'EPS growth' this past decade is not a mathematical impossibility. Far from it. Quite apart from the fact that 'EPS' confounds two metrics (E and #S), there are dozens of companies that have done what Apple did.

After the recession is over, Apple's growth levels will increase substantially. Even over the next 12 months it will move upwards. It's already started to in a small way this last quarter. iPod sales drops are attributed to factors that include the recession, but also the fast growth of iPhones.

We don't know what they're doing. But at the conference, they said that their investment policy at this time is directed towards conserving their cash. Translate to mean "protecting our investments in a difficult time for investments".

Some other companies with large cash and investment holdings have announced some losses there. Apple's done very well.

I don't know about Google, but I believe that MS did say their holdings had taken a hit.

I also think that these companies are smarter than Goldman and the rest. Goldman hs done ok because of the governments actions right now. Though, at this time, they're denying that they ever said they were in big trouble, even though it's a matter of record.

Interesting article in the Times about that the other day.

I think what he's saying that when a company gets very large, it's difficult to continue the same growth rates it had when it was smaller. I don't think he was meaning "earnings growth potential".

I didn't get that he was talking about "market cap" but rather growth of sales.

He'll have to come back and explain.

Yes, and if you'd read all the words I wrote...


So Apple doubled in size during the last six months? Is that what you are really trying to tell me?


I know that's what Apple did. That was precisely my point. There isn't any rule on heaven or earth that says it can't continue. Will it? I have no idea. It's the people claim to know, based on some arbitrary concept, that I have a quarrel with. You could easily have applied that same concept to Apple three years ago, after all the iPod driven growth was beginning to level off, and you'd have been dead wrong.

Apple isn't mining bauxite, they make consumer products. If they continue to pull rabbits out of their hats by making new products people really want, then the rule does not apply. Period.

I refer back to:


Market cap. Impossible. I can't agree with either the method of measurement, or the conclusion.

First of all, it's earnings that matter, not market cap. Second, Apple can indeed continue to grow earnings at recent-past rates. Is it going to be easy? No. Has it been easy? No, it might only look that way. The last two big spurts of growth were driven by different products, both huge hits. If they're going to continue growing at the past rate, they'll need an Act Three. I won't even begin to pretend to know whether it will happen, because in all honestly, I didn't predict the first two acts, and I never met anyone who did,

You're right. Even though he said it, I didn't catch it.

I agree with what you say on that. Somehow, I thought he was saying that the companies growth would have to slow down.

Just goes to show that when you expect something, you see it. It wouldn't occur to me that someone would say that.

Not right. AAPL split in June of 1987 and June of 2000. The $13 price is 2x split adjusted. But you have 4X the shares in 2004 than in 1987 (if you didn't sell any). So a $10,000 investment in 1987 (before the split) would be worth $40,000 in 2004. At the same split adjusted price of $13 per share (around $52 actual share price at the time). So that's a $30,000 profit. Not a break even. And AAPL split again in the beginning of 2005.

Edit- Added Comment-

If you had bought $10,000 of AAPL at $52 in Jan. of 1987 you would have about 200 shares in 1987. 400 shares in the middle of 1987. 800 shares in the middle of 2000. And 1600 shares in the beginning of 2005. Today, those 1600 shares of AAPL would be worth about $264,000. Your base price per share would be $6.50. Apple has $28 per share in cash alone.

Apple ability to grow has nothing to do with the size of it's market cap. The growth rate is already factored into the market cap. The more growth anticipated, the higher the share price, the larger the market cap. It's not the other way around. Market cap do not determine the growth rate.

But Apple ability to grow has everything to do with their penetration into the market they're in. Right now Apple has less than 4% of the World computer market. Less than 2% of the cell phone market. Digital downloaded music just taking off and Apple stands to will get the lion share of that. Downloaded video is just taking off but still up for grabs. The only market that Apple may be saturated in is the MP3 player market. But who knows what market Apple will enter or create next. Apple large market cap is not a hinderance when you consider this.

Dell on the other hand has a market cap about 1/6 of Apple. But Dell has over 20% of the World computer market. Dell's small market cap is not going to help Dell grow at a faster rate than Apple. It will almost be impossible for Dell to just gain 50% more of the World computer market share. Where as it's very possible that Apple can double it's World computer market share.

Microsoft has a market cap that is only 25% larger than Apple. But Microsoft has 90% of OS market and over 80% of the office suite. The two biggest money maker for Microsoft. Microsoft doesn't stand a chance of growing as fast as Apple unless it enters another market that it can succeed in. It's not Microsoft market cap that hinders it growth. But the fact that Microsoft already saturated the market where it's making the most money in.

everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.

and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.

Fair enough, I could say the same is true but as the new guy here, the onus is on me to earn your trust, not the other way around. Apologies.




I agree with your whole post here, but what I would say is that these machines are not really capable of driving trends over a sustained period of time, or even following them. A machine won't be able to tell the difference between a rumor and a fact for example (say about Mr Jobs), they're much more concerned about eeking out pennies and cents in the tiny second by second fluctuations in the market. (I am referring specifically to HFT computers, not programs that wait for the price to drop to $20 before buying 10,000 lots, which have been around since the 1980's).

Now of course you could ask what social benefit this brings to the world (answer is none) or how listed companies benefit (they don't), or even how investors benefit (fine if you bought Goldman Sachs in January) but I don't see real traders being replaced by these things in the forseeable future; in fact, they're usually run by traders anyway.

Good point. I interpreted the original Al Bundy reference to 'market cap' being the intrinsic value represented by the sum of all expected discounted future cash flows. (The reason that Apple -- and hundreds of other stocks -- fell across-the-board was because market risk premia went up substantially during the financial crisis. It would seem that risk premia have returned closer to historical levels.)

One could argue that Apple was undervaled at $75 (or whatever the low was) a few months ago (and those of us who thought that bought ), and reasonably priced today given its expected future growth rates. The larger point Al Bundy was making was that, given the fact that there is a realtively fixed (or slowly growing) aggregate market, higher growth rates will have to come from expanding market share. The larger you are, the more difficult it is. Just as the iPod has matured, so will the iPhone after the Verizons and the Chinas have been penetrated (perhaps the market factors those in already, we don't know). While we might say that Apple still has room for growth in its computer share, Apple's share as an individual company is in the ball-park of shares of other individual companies such as Dell and HP; it is unlikely that they can have a share that is subtantially higher or lower than firms like that.

All that said, will I sell my AAPL at the current price? Definitely not. Do I expect it to go higher? Definitely yes. But do I expect the stock to increase in value by 10X in the next 5 years like it did the past five? No, since that would require AAPL to trade at $1600 and the company's market cap to be $1.5 trillion. I think that is all that Al Bundy was saying.

Oops, heaven wasn't a clever metaphor it was a typo.

Because any portfolio will contain securities that move up and down contrary to each other or have offset cycles; basic materials, manufacturing, commodities, retail sales etc. Not sure what you're asking here, it seems rhetorical.


Swills around is a poor metaphor, but really, was it worth pointing out?

I meant 2-3% of their fund, and I was also pointing out this is a large amount, not a small amount, so your comment about diversification wasn't necessary. We're not talking about other tech companies, although it would be similar for other large cap tech stocks.


70% of the stock is instutionally owned, a simple google search will show that. This isn't wikipedia or 10th grade so I didn't think I needed to cite that, but I'll make an effort to back up wild stats in future and not post exhaggerations for dramatic effect, which is what I did. I rushed my post to be honest, the 25%, I pulled out of my arse.

So, there are 17 members of the board, assuming 30,000 chares each, plus 10,000 purchased (we know Eric didn't take this up, so it's probably a wrong assumption anyway) is around half a million shares - there are 895 million shares on the market, so at most the board would have 0.57% of the shares.


Actually 'you and I' is perfectly acceptable in written English, particularly British English, although my wife (who's a journalist) pulls me up on this all the time, so she shares your opinion. When people point things like this out on forums though, it's somewhat inimical.

well what the comment about Verizon shows is that this guy isn't really thinking. I know he's all "Apple would increase their user base cause so many folks didn't want to switch to get the iphone cause they like Verizon, etc"

but what he disregards is that Verizon is using a totally different flavor of phone tech. to create a device for Verizon would require Apple to re-invent the wheel to a serious degree. Also you can bet that Verizon would want an exclusive and we know the flack that Apple is getting on the phone.

I for one can't see it. it isn't logical from a technological point of view and from a legal one I would not be shocked if ATT got it worded in their contract that ANY device that had built in cell data capabilities was exclusive to ATT for the length of the contract. It would be idiotic to have otherwise. So from both views, it makes more sense that any new (non iphone) devices will be held until the contract is over. perhaps with a wifi only first gen and then a wifi/cell second gen. and anything coming out would be set up with Apple's choice of tech (being GSM then into the next gen of specs) but unlocked to work with any company that can handle it. same as further iphone versions at that point.


I disagree. the only flaw they have had is refreshing the laptops 4-5 weeks after that period. this year they did better by doing it a month into the 'season' when they had not yet had the large flow of sales, which was better. a refresh to officially kick off the season would be best, imo.

but a computer is not something you can buy, turn on and be comfortable with in one night. students need at least a couple of weeks go get really going, make sure they have all the software they need, get the right details from IT for their email etc.

the only flaw left is that it doesn't work for high school students. I think if Apple would to open it up to that group they would be in business. cause many schools are asking and a few are requiring access to a home computer and/or laptop. at least in larger cities.


the business retail season is still "Christmas" and Apple definitely works around that period as much as they can.



that presumes that the iTablet would be a device marketed to and even useful to students. the dominate theory is that it will be a 'netbook' in the truest since. a device for doing net activities (email, aim, web browsing) with perhaps itunes added in. in other words, a giant iphone/touch (running that software) NOT a full on notebook. which is what is more useful to students.

This is the crux of the matter, IMO. Apple has successfully found and exploited new markets for driving growth, instead of trying to squeeze more out of the markets they were already in. This is the single, largest difference between Apple and Microsoft, and the reason why Apple has been experiencing explosive growth and Microsoft has not.


I try to respond to what people actually write, just as I hope others will do for me.


Markets decide valuations on a daily basis, that's what they are for. These valuations are predicated on the greed-fear continuum, with actual profits often overlooked on both ends of the scale. Profits do come into play at some point, but we can't expect stock valuations to be logically attached to earnings over the short term.


Or more to the point, they'd have to grow earnings to something like $50/share from the current $5-6/share. Likely? No, but then, neither was the run they've had. A couple more huge hit products in new markets, and they could do it.

That's by no means true.

Apple's iPhone sales are expected to rise considerably, as are the sales of the Touch.

Apple's computer sales will rise much faster again. That's already begun in a smaller way

Apple's software sales have also done well.

It isn't the long term trading that's a problem with this. It's the millions of trdes that are done in one second that are the problem. It's a positive feedback loop. In just a couple of minutes, entire sections of the market can collapse. The intent is to make these programs handle more and more of the trading, in more areas. By the time someone notices what's going on, and that may just take 30 seconds, the problem is already too big. By the time they can send the messages across to those who can actually do something, its another minute or two. By that time, the entire system could have come crashing down.

It's naive of those who are promoting these systems to think that they work well when they don't. They can't deal with sudden hiccups. That's why many in the industry are so concerned. But the problem is that trading is about one thing only, making money for those involved, no matter what the cost to the economy as a whole, or anything else for that matter.

Just like what we're going through with Bank of America and the bonus situation. Same thing with what's his name at Citigroup who is getting that $100 million bonus.

That's the big problem here. This should be slowed down until someone actually understands it, because it's obvious that no one designing and using these systems does.


Well, with 90% of the trades being done without the intervention of traders, I can't agree with that last.

There are so many trades being done these days, that it may seem as though much of it is being done through traders, but it isn't.

I remember when I was in elementary school in the late 1950's that trade numbers on the NYSE were about 1.5 million a day. Look at what's happened since then. Most of this is due to computers, first manually, and now, automatically.

Everyone does not have an iPhone. Consider all the other carriers people refuse to switch from and you see additional potential for growth. Consider all of the potential growth through China Unicom, and you can imagine even more growth. There is still a lot of growing left for iPhone.