Apple now worth more than Google and Microsoft combined [u] - Page 3

Originally Posted by tundraboy

P/E earnings is still low.

We're just seeing the tip of the iPad iceberg. Post-PC era is true, it's real, it's going to happen, it is happening. And the post-PC era isn't a tablet era, it's an iPad era.

Enterprise smartphone and tablet market might have reached an inflection point with Halli announcement (even though I hate the guts of that company, but that's immaterial), and today NOAA.

Macs at 5% (8%?) worldwide share and rising but still a long way to go.

Throw away all your rules of thumb about investing. Especially those along the lines of "it can't possibly get higher than this". Look at the numbers, look at the market potential out there, then make your best informed estimate.

The general investing public might have finally capitulated and said yeah, this Apple thing --doesn't look like it's just a fluke.

And remember, this recession will not go on forever and there will be a recovery eventually.

Originally Posted by digitalclips

Why not simply use cash to offset debt in the calculation and add what's left back? In this model had Apple had 400,00B in cash it would be worthless. Or am I missing something lol

Originally Posted by Dr Millmoss

http://www.npr.org/blogs/money/2012/...-mean-not-much

Something to consider.

Originally Posted by digitalclips

2nd condescending put down today......

Originally Posted by mateo999

I'm not claiming that the company's cash is worthless. I'm stating that the implied market value of Apple's *operating* assets (excess cash is a non operating asset) is less than that of XOM.

Obviously if there were two identical companies, except one had $105 per share in cash, you'd value a share of the cash-rich company at a $105 premium to otherwise identical company.

On a vaguely related note, of the 97B Apple has in cash and investments , $64 remains offshore, and thus cannot be repatriated to the US without paying taxes. So not all of the 97 is available to distribute to shareholders free and clear.

I hope no one is construing my comments as negative toward the company. Full disclosure, i'm long AAPL and have been since ~85$/share

Originally Posted by anantksundaram

Pretty much most of his posts sound like that. Don't take it personally.

Originally Posted by anantksundaram

The most remarkable thing is, Apple's trailing P/E is still only 14x, even at this price. Essentially, the same as that of Walmart! The average for the S&P500 during the last 100 years is 16x!!

Let's not even talk about Apple's forward P/E.....

Originally Posted by mateo999

I think it's actually lower, because you should adjust the share price down by the $105 per share it holds in cash and investments. On a cash adjusted PE, its more like 10x p/e

Originally Posted by digitalclips

So if Apple sent all of us that bough AAPL under $100 a very large check to say thanks, on paper they would improve their position?

Originally Posted by anantksundaram

Nonsense. If I were to sell today, I'd have a lot of extra cash in the bank. As in real money.

Originally Posted by digitalclips

2nd condescending put down today, I must be doing something right. LOL There is a historical track record of profit taking after a successful launch BTW.

I never see looking at the DOW or NASDAQ is being all that relevant to AAPL. Of course if the swing is a major catastrophe then yes, but not the day to day swings. Apple even defied the recent recession.

Originally Posted by digitalclips

2nd condescending put down today, I must be doing something right. LOL There is a historical track record of profit taking after a successful launch BTW.

I never see looking at the DOW or NASDAQ is being all that relevant to AAPL. Of course if the swing is a major catastrophe then yes, but not the day to day swings. Apple even defied the recent recession.

Originally Posted by mateo999

I'm not claiming that the company's cash is worthless. I'm stating that the implied market value of Apple's *operating* assets (excess cash is a non operating asset) is less than that of XOM.

Obviously if there were two identical companies, except one had $105 per share in cash, you'd value a share of the cash-rich company at a $105 premium to otherwise identical company.

On a vaguely related note, of the 97B Apple has in cash and investments , $64 remains offshore, and thus cannot be repatriated to the US without paying taxes. So not all of the 97 is available to distribute to shareholders free and clear.

I hope no one is construing my comments as negative toward the company. Full disclosure, i'm long AAPL and have been since ~85$/share

Originally Posted by Dr Millmoss

Did either of you actually read that story? (Too much to ask, I know -- the insults flow so much easier if you don't.)

The point is, momentary or daily moves even in the broader indexes of the market are not really important. This is also true, if not more so, for individual stocks. You could only read this as a "put down" if you have some kind of persecution issue.

Originally Posted by mateo999

Sure.

The market capitalization is simply (Price per Share * # shares outstanding). Market caps for AAPL, XOM, MSFT, WMT, and GOOG are: 461.4B, 406.6B, 257.0B, 212.7B, and 198.4B respectively. Thus all the articles that state Apple is the most valuable company are basing their "analyses" on market capitalization. Where this falls short is that it misses the entire debt portion of a company's capital structure. As a rule debt has absolute priority over equity in a bankruptcy, and interest payments have priority over any cash flows given to equity holders.

If a company has 100B in debt outstanding, and it *also* has a market capitalization of $100B, then the market is saying this company has an equity "cushion" of $100B beyond the $100B in debt outstanding. Thus the implied value of the company is $200. If a company was only worth it's market cap (as this article seems to imply), then said company should have a stock price of $0 because all its value is owed contractually to bondholders. Note: that the above analysis assumes the company doesn't have significant excess cash on hand beyond what's required to run the business.

Enterprise value is calculated as Market Cap + Market Value of Debt Oustanding - Excess Cash. EV gets to the heart of what the operating assets of a company are being valued at. It's also how most M&A transactions get valued at, as you'll often read: "the deal was valued at 8x trailing EBITDA" where value is not market cap, but EV.

Onto the calculations:

AAPL: Market cap ($461.4) + debt ($0) - excess cash ($97B) = 363.8B EV
XOM: 406.6B + 16.8B - 46.3B = 377B EV

and so forth. MSFT has an EV of 211.5B and GOOG has an EV of 159.2B

As an aside, the reason you subtract out excess cash (of which Apple has some 97B) is because this can be considered a direct offset of debt (as the cash can be immediately used to pay down debt). Often times you'll hear EV being calculated as Market Cap + Net Debt (debt, net of cash) which is the same analysis as above. Hope this helps.

Originally Posted by mateo999

I think it's actually lower, because you should adjust the share price down by the $105 per share it holds in cash and investments. On a cash adjusted PE, its more like 10x p/e

Originally Posted by island hermit

Actually, there is a lot of profit taking happening today.

Originally Posted by island hermit

I read the DOW only to see if the market is ready for an upswing or a downswing based on a "at least 1 year" chart. It helps to better gauge the movement of individual stocks.

On a day to day basis, though, watching the DOW would just drive me crazy.

Originally Posted by SolipsismX

I appreciate the detailed post but I can't say I understand it. In fact I'm quite confused on how debt looks like an assets and having cash on hand looks like a liability.

Originally Posted by marcusj0015

So, Apple is now the largest company in existence?

Originally Posted by I am a Zither Zather Zuzz

Wait...Where's Slappy to tell us that Android is Winning?

Where's the haters to tell us how "innovative" Microsoft is with its Windows Phones?

Funny, I don't seem to hear anything...

Originally Posted by mateo999

The earnings are generated from the operating assets of the company, not its cash. So by including the value of cash (which should be valued 1:1 to its face value) in the numberator of the P/E ratio, you're wrongfully pushing up the calculated P/E. This is punishing apple's valuation by making it look more expensive than it really is.

Put it this way... Apple's operating assets earn $40 in EPS, to which you apply a ~10x P/E multiple = $400. Then you add on the $105 in cash, which gets you to around today's stock price. I'm saying the company is currently valued at under 10x p/e, not 14x.

Originally Posted by SolipsismX

I appreciate the detailed post but I can't say I understand it. In fact I'm quite confused on how debt looks like an asset and having cash on hand looks like a liability.

Originally Posted by OllieWallieWhiskers

Apple is about to unveil the "Sell a share, get an iPad" program.

Originally Posted by Dr Millmoss

So this really points out the absurdity of dwelling on Apple's cash assets as something of value to stockholders. Unless you are planning to buy the entire company, it's a complete abstraction to you.

Originally Posted by SpamSandwich

Sure, but the jump in price today is still mind-blowing.

Originally Posted by Dr Millmoss

I pretty much ignore the DJI, it's just too arbitrary. But the larger point is, we tend to fixate on momentary stock movements because that information is so readily available today. I wasn't very long ago that only traders on the exchange floors had access to this information. Everyone else found out what their stocks did when they opened their morning paper the next day. I go for weeks sometimes without looking at my portfolio at all. If I have any belief in my investment strategy then it's not necessary to check it all the time. It's a good discipline. I recommend it. For an investor. For a trader, your mindset is totally different. Decide which one you want to be.

Originally Posted by Dr Millmoss

Did either of you actually read that story? (Too much to ask, I know -- the insults flow so much easier if you don't.)

The point is, momentary or daily moves even in the broader indexes of the market are not really important. This is also true, if not more so, for individual stocks. You could only read this as a "put down" if you have some kind of persecution issue.

Originally Posted by SolipsismX

Why do people buy stock in a company? Unless you're a lunatic you are betting that the stock will rise due to increased performance over a set or open time frame.

Now you say that having cash is not an asset for a tech company but that means they can buy supplies at cheaper prices, not have to borrow and pay interest, can invest more in R&D, and wait out dips in the market. Why you don't think this is a good thing sounds absolutely crazy!

I get mateo999's general point but claiming that having cash on hand is not of value is ridiculous as it clearly points to the company's future health, assuming they use it wisely.

I'd love to hear your argument why Apple should take on debt instead of profit.

Originally Posted by SolipsismX

WP7 is innovative but being innovative doesn't make a product popular. Even being better tech doesn't mean a product wins over inferior tech as there are many other aspects to be considered. I think MS's biggest problem with WP7 is that they decided to keep the Windows name. If they had only rebranded it they could have shed a lot of what people dislike about MS. I also think they could have taken a solid hold of the tablet industry had they focused on that with the WP7 UI instead of focusing on a phone that they clearly are very late to market. Does that really make an Apple hater?

Originally Posted by SolipsismX

I appreciate the detailed post but I can't say I understand it. In fact I'm quite confused on how debt looks like an asset and having cash on hand looks like a liability.

Originally Posted by Psych_guy

I disagree. Microsoft needs to change it's name period. People don't like Microsoft.

I never used one, but people have said that the Zune was a far superior product to the iPod. But it crashed and burned to the point of disintegration. Why? Certainly not because it was a Windows Music Player. Because it was perpetuated by Microsoft, I think. That and their lame marketing strategy and that name!! Zune.

Microsoft is identified as the big behemoth that had to crap on people on its way to the top, and then just sat there, thinking they could continually come up with incremental progress with no real innovation, until it was too late.

Originally Posted by Psych_guy

I never used one, but people have said that the Zune was a far superior product to the iPod. But it crashed and burned to the point of disintegration. Why? Certainly not because it was a Windows Music Player. Because it was perpetuated by Microsoft, I think. That and their lame marketing strategy and that name!! Zune.

Originally Posted by focher

I be luvin me my's Apple stock. I moved my previous employer 401k over to a Rollover IRA last year, then promptly bought all AAPL with it. I'm long on Apple.

Originally Posted by matrix07

I think he meant the cash is IN the market cap but I'm not sure why having more debts is a good thing.

Originally Posted by SolipsismX

Why do people buy stock in a company? Unless you're a lunatic you are betting that the stock will rise due to increased performance over a set or open time frame.

Now you say that having cash is not an asset for a tech company but that means they can buy supplies at cheaper prices, not have to borrow and pay interest, can invest more in R&D, and wait out dips in the market. Why you don't think this is a good thing sounds absolutely crazy!

I get mateo999's general point but claiming that having cash on hand is not of value is ridiculous as it clearly points to the company's future health, assuming they use it wisely.

I'd love to hear your argument why Apple should take on debt instead of profit.

Originally Posted by SolipsismX

I agree that Zune is a dumb name, but I also think iPod and iPad are also dumb names. I think the Zune's failure outside of coming to market so late compared to the iPod is that the first generation was bad. It wasn't until later that the OS was very good. By that point the damage was done and the iPhone was already sucking all the oxygen out of the handheld market. Not just for phones but for the iPod, too.

Originally Posted by digitalclips

Persecution issue? Nice try.

You wrote ... "Yeah, somebody always has a prediction that never fails. Millions of stopped clocks can't be wrong." .. to my joke about AAPL never fails to drop after a major success. Which is a common response to large AAPL stock gains here on AI, kind of like 'Safari is snappier' is to a new OS update ...

I joked about the put down ... I could have simply pointed out it was snarky ... but I passed

Originally Posted by Dr Millmoss

Bizarre hardly covers it.

Originally Posted by Dr Millmoss

I am saying that carrying large amounts of cash on a balance sheet is not relevant to investors, because investors never see a single penny of it unless the company either pays some of it out as a dividend or buys back shares. The money might as well be on the moon, as far as investors are concerned.