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Apple tops Microsoft to become most valuable company ever - Page 2

post #41 of 76
Quote:
Originally Posted by Dick Applebaum View Post

I, too am waiting for an iMac refresh (my BDay is the 29th) and we Virgos are anal about having the latest tech toys...

Actually, tomorrow or the 28th would be a good day for a soft rollout of a new iMac and a new FCP X.

Is this a hint for us here to chip in?
post #42 of 76
Originally Posted by aaarrrgggh View Post
Um... I can do that with any dlna hard drive and compatible tv set today... What is the big deal?

 

That I can't do it with my existing media in its existing setup without any sort of additional conversions or configuration other than buying a small piece of hardware and having a gorgeous and usable interface is the big deal.

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
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post #43 of 76

Speaking of iPads...

 

 

http://www.youtube.com/watch?v=yFMu3llAnaM

 

Can you imagine the effect if one of these sauntered up and stood at the urinal next to you?

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post #44 of 76
Quote:
Originally Posted by anantksundaram View Post

That makes zero sense. Value is value. Inflation is in both the  numerator (cash flows) and denominator (cost of capital) in all valuation.

Actually that's only partially true. A company worth 650billion in today's dollars would not be worth as much as a company being worth 650billion in yesterday's dollars because of inflation. However, I think the comparison stands because everything is relative as almost every company would be worth less than the companies at the time MSFT hit 650billion in market cap. 


Edited by AdonisSMU - 8/20/12 at 12:56pm
post #45 of 76
Quote:
Originally Posted by AdonisSMU View Post

Actually that's only partially true. A company worth 650billion in today's dollars would not be worth as much as a company being worth 650billion in yesterday's dollars because of inflation. However, I think the comparison stands because everything is relative as almost every company would be worth less than the companies at the time MSFT hit 650billion in market cap. 

That's true, but that's not what he said.

You are suggesting that one should consider value relative to other stocks (i.e, value as a percentage of total combined global market cap). While there is something to be said for that, it's not what he was suggesting. He was suggesting that $650 M in value is the same regardless of time.
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post #46 of 76
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Originally Posted by malax View Post

The problem with AAPL as an investment is that there is never a good time to get out.  I've been gradually accumulating shares since Jobs came back and it's been hugely profitable.  But now I want to finish my basement or buy a car, and I'm loath to sell any of my AAPL shares because they are my best investment by far.  The few times I have sold some shares to lock in my gains, I've just found myself buying more shares at a higher price a few months later.

 

Oh, the hardship of being a long-term AAPL investor :-)

 

 

Your "hardship" is why you should be thrilled about the dividend.  You get cash for your car, basement, or whatever, without having to sell the stock and paying a ton in taxes.  In the future you will get more in cash.  I would expect that Tim Cook and the board will increase the dividend instead of allowing the stock price to get too high.

post #47 of 76
Quote:
Originally Posted by jragosta View Post

He was suggesting that $650 M in value is the same regardless of time.

Actually, to clarify, what I said (implied) was this. The nominal (expected) value of a stock is nothing more, nothing less than a function of two fundamental variables: nominal expected future cash flows (typically proxied by earnings by analysts) and the market's discount rate (expected return) for the stock, taking into account its expected growth prospects (typically proxied by the P/E ratio by analysts, which, it's easy to show, is exactly the same as {1÷[rE − g]} where rE is the expected return on the stock and g is the expected long-run growth rate). 

 

Since, at any point in time, the market values a stock based on its expectation of future evolution of fundamentals -- and presumably, people buy and sell based in their expectations -- the market price that we observe is an equilibrium (however temporary) based on all the information that the market has up until that point. In other words, in a well-functioning market, there is little distinction between realized and expected prices (referring to an earlier point of yours).

 

Now, if you're suggesting that $650B will allow you to consume less today than $650B in 2000, that is a completely valid point and one I totally agree with. But that is a different argument.

 

All this aside, it is (as has been discussed many a time in this forum) silly for AI to even bring up MSFT's "$650B" as a point of comparison to Apple since, by any reasonably metric and by the substantial benefit of hindsight (not just with MSFT, but the market as a whole at that time), that price reflected a bubble. Apple's valuation is still anchored in very reasonable expectations of the evolution of fundamentals.

 

PS: There were a couple of other silly posts (not yours), to which I won't bother to reply.

post #48 of 76
Quote:
Originally Posted by herbapou View Post

 

 

The P/E is indeed a very important stat to take into account.  Apple market cap may be high, but its valuation is still outstanding. Its the first time we have a company with both a huge market cap and good valuation.  In fact, if apple would be a small company, its growth potential would probably make it have a multiple of 20+  This is where the law of large numbers takes effect, it keeps Apple stock price in check with earnings.

 

Given the january 2012 monster earnings, its possible investors are going to drive the stock up and expand the PE prior to january 2013 earnings.  But make no mistake, Apple will need to deliver in january because the stock will come back down to a more normal PE or 14 or 15 regardless of what the estimates were.

 

But if Apple delivers good earnings in january, the TTM EPS will rise and Apple may hold its stock price while compressing its PE back to 14. That would be very good news. If everything is goes well Apple may rise to 800$ and hold it through jan 2013 earnings. Apple need a TTM EPS of 55$ in january to hold a stock price of 800$.  To get that TTM EPS Apple will need to report a jan 2013 EPS of 16$ or more. Watch the guidance in october, if apple guide 12$ or more we are golden.

 

And don't forget that Apple is now paying a dividend.  Which makes valuing Apple stock even more interesting, and also gives a reason to hold the Apple stock even if the share price levels off.   With Apple EPS numbers and all the cash they have on hand, Apple will continue to be a good stock to own.

post #49 of 76
Quote:
Originally Posted by uguysrnuts View Post

I think Apple's distinctive achievement is that they became the most valuable company by delivering the best, while Microsoft achieved theirs by catering to the lowest common denominator, and essentially trying to be all things to everyone.

Remember "I'd shut it down and give the money back to the shareholders"? What ever happened to that guy? lol.gif

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"Apple should pull the plug on the iPhone."

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post #50 of 76
Originally Posted by Suddenly Newton View Post
Remember "I'd shut it down and give the money back to the shareholders"? What ever happened to that guy? lol.gif

 

Running a company whose market cap is half of Apple's quarterly revenue.

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
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Originally posted by Marvin

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post #51 of 76
Quote:
Originally Posted by anantksundaram View Post

Quote:
Originally Posted by jragosta View Post

He was suggesting that $650 M in value is the same regardless of time.

Actually, to clarify, what I said (implied) was this. The nominal (expected) value of a stock is nothing more, nothing less than a function of two fundamental variables: nominal expected future cash flows (typically proxied by earnings by analysts) and the market's discount rate (expected return) for the stock, taking into account its expected growth prospects (typically proxied by the P/E ratio by analysts, which, it's easy to show, is exactly the same as {1÷[rE − g]} where rE is the expected return on the stock and g is the expected long-run growth rate). 

 

Since, at any point in time, the market values a stock based on its expectation of future evolution of fundamentals -- and presumably, people buy and sell based in their expectations -- the market price that we observe is an equilibrium (however temporary) based on all the information that the market has up until that point. In other words, in a well-functioning market, there is little distinction between realized and expected prices (referring to an earlier point of yours).

 

Now, if you're suggesting that $650B will allow you to consume less today than $650B in 2000, that is a completely valid point and one I totally agree with. But that is a different argument.

 

All this aside, it is (as has been discussed many a time in this forum) silly for AI to even bring up MSFT's "$650B" as a point of comparison to Apple since, by any reasonably metric and by the substantial benefit of hindsight (not just with MSFT, but the market as a whole at that time), that price reflected a bubble. Apple's valuation is still anchored in very reasonable expectations of the evolution of fundamentals.

 

PS: There were a couple of other silly posts (not yours), to which I won't bother to reply.

Hey Anant, have you tried plugging in some experimental values into the formula and solving for long-term growth rate?  I have been baffled by AAPL's low P/E for a long time, and would be

interested to know what assumptions the market is making for Apple's growth.

post #52 of 76

Hey Samsung Chairman Mr. Lee, are you looking at this news? I bet you will not be able to sleep for a few days. American jury will deliver Samsung another big blow come this Friday. Get ready to spit out huge chunk of cash! Apple will become fatter and fatter....they'll gonna have hard time digesting all that cash. I'm in the middle of persuading my wife to get iPhone 5...because that's the only way I can get my hands on it. Wish me luck fellow Apple maniacs!

post #53 of 76
Quote:
Originally Posted by RPT View Post

Obviously, as many here points out, any valid comparison of the market cap has to be made in inflation adjusted currency. However, it should be noted that while MS P/E at the top was around 35, Apples P/E is currently around 15, which indicates a sounder economy with better earnings.


Funny how this same logic isn't applied when calculating the highest grossing movies of all time.  If it were, then Gone With The Wind would still be the highest grossing film of all time.

 

In the end it's all subjective and can be spun in any number of ways depending on who's doing the reporting.  Still, it's a phenomenal achievement by Apple.

post #54 of 76
What really matters here is that Apple had sales that were four times that of Microsoft last calendar year, as opposed to Microsoft's sales back in 1999. About three times, taking inflation into account. Microsoft's valuation was less due to the intrinsic value of the company as to the crazy market back then, and an overinflated concept as to how far Microsoft could rise.

Because of this, I believe that Apple's valuation is correct, and Microsoft's wasn't. A major correction was due. It hit all of us investing at the time. We had a similar re-assessment during the last big recession. But, Apple came back much stronger than before, while most stocks still haven't reached their pre-recession level.

In fact, Microsoft's current valuation is almost entirely based on their Win 8 sales projections , plus the license sales of products based on it. Since Win 8 has received such bad press, I doubt it will be such a major success. If not, then the stock could end at the lowest levels it's been at—around $14.50.

It will be interesting to see how this all plays out early next year, after the holiday selling season is over.
post #55 of 76
Quote:
Originally Posted by quinney View Post

Hey Anant, have you tried plugging in some experimental values into the formula and solving for long-term growth rate?  I have been baffled by AAPL's low P/E for a long time, and would be
interested to know what assumptions the market is making for Apple's growth.

It's pretty simple. We will continue to see a compression of the P/E. no realistic assumptions as to growth rate can be made outside of a year's timeframe, and that's difficult too. Without knowing what the product mix will be, we can't even make an educated guess as to sales and income. Anyone who says they can is walking on water.
post #56 of 76
Quote:
Originally Posted by quinney View Post

Hey Anant, have you tried plugging in some experimental values into the formula and solving for long-term growth rate?  I have been baffled by AAPL's low P/E for a long time, and would be

interested to know what assumptions the market is making for Apple's growth.

That's really quite straightforward to do. Apple's forward P/E is between 12x and 14x depending on which analyst you look at (and even that includes its cash).

 

Let's err on high side, and say it's 14x.

 

If Apple's rE = 14% (which is probably much higher than what it actually is; but I am penalizing Apple here, just to be on the safe side), that implies a "g" (long-run annual expected earnings growth rate) of 7%.

 

Considering Apple's current rate of earnings growth, even if the current growth where to fade rapidly in the next, say, six or seven years to no more than the global nominal GDP growth rate from Year 8 to forever, that is on the low side.

 

If, OTOH, you think that Apple's true risk-adjusted discount rate is closer to 12% (which is what I think it is, perhaps even 11%), we are talking about an implied g = 5% (or even 4%).

 

You be the judge!

 

(Edit: Cleaned up some language!)


Edited by anantksundaram - 8/20/12 at 2:48pm
post #57 of 76
Quote:
Originally Posted by MACT View Post

in 1999, who would have ever guessed? 

 

Quote:
Originally Posted by Tallest Skil View Post

 

In 2003, who would have ever guessed!

 

In 2007, Steve Ballmer was STILL clueless. 

 

High school student leaving for college in 2007 earned their bachelors degrees without MS phones, and will have went on to earn an advanced degree without a MS tablet. MS, in many of their minds, was their father's OS.

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post #58 of 76
Quote:
Originally Posted by AppleInsider View Post

 However, Apple's new achievement does not account for inflation. 

 

Yeah, inflation... it was called dot com bubble (http://en.wikipedia.org/wiki/Dot-com_bubble)

post #59 of 76
Quote:
Originally Posted by anantksundaram View Post

Actually, to clarify, what I said (implied) was this. The nominal (expected) value of a stock is nothing more, nothing less than a function of two fundamental variables: nominal expected future cash flows (typically proxied by earnings by analysts) and the market's discount rate (expected return) for the stock, taking into account its expected growth prospects (typically proxied by the P/E ratio by analysts, which, it's easy to show, is exactly the same as {1÷[rE − g]} where rE is the expected return on the stock and g is the expected long-run growth rate). 

That's not what you said. You said:
"That makes zero sense. Value is value. Inflation is in both the numerator (cash flows) and denominator (cost of capital) in all valuation."

Your new statement is closer to the truth. So let's use your new position:
Value is a function of two fundamental variables - future cash flows and markets discount rate (which you admit is proxied by the P/E ratio).

The future cash flows will depend strongly on inflation. Market discount rate will not (expected P/E ratio remains fairly constant over time and is independent of inflation). Therefore, as inflation occurs, the first variable goes up and the second remains relatively constant. So inflation causes the market value of a company to go up - which is the exact opposite of what you said the first time.
Quote:
Originally Posted by anantksundaram View Post

Since, at any point in time, the market values a stock based on its expectation of future evolution of fundamentals -- and presumably, people buy and sell based in their expectations -- the market price that we observe is an equilibrium (however temporary) based on all the information that the market has up until that point. In other words, in a well-functioning market, there is little distinction between realized and expected prices (referring to an earlier point of yours).

Actually, I didn't make such a point - at least not in this thread. It's also irrelevant. We don't have to talk about future prices at all - we can talk about prices yesterday vs 10 years ago without getting into differences between realized and expected prices. The fact is that the market valued Microsoft at $650 B some time ago. They value Apple at $650 B today. Since there has been significant inflation during that time, Microsoft actually had less value.

Now, one could argue that one needs to correct the P/E by the change in the market's P/E (or the percentage of the entire global market cap that is due to each company). However, P/E ratios and total market cap are not all that different today than they were when MS hit $650 B, so the effect is smaller than the inflation effect.
Quote:
Originally Posted by anantksundaram View Post

Now, if you're suggesting that $650B will allow you to consume less today than $650B in 2000, that is a completely valid point and one I totally agree with. But that is a different argument.

No, it's part of the same argument. Apparently, the concept of 'inflation' escapes you.
Quote:
Originally Posted by anantksundaram View Post

All this aside, it is (as has been discussed many a time in this forum) silly for AI to even bring up MSFT's "$650B" as a point of comparison to Apple since, by any reasonably metric and by the substantial benefit of hindsight (not just with MSFT, but the market as a whole at that time), that price reflected a bubble. Apple's valuation is still anchored in very reasonable expectations of the evolution of fundamentals.

The price MAY HAVE reflected a bubble, but it's irrelevant. The issue is which company had a greater market cap - not WHY one company had a greater market cap.
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post #60 of 76
Quote:
Originally Posted by anantksundaram View Post

Quote:
Originally Posted by quinney View Post

Hey Anant, have you tried plugging in some experimental values into the formula and solving for long-term growth rate?  I have been baffled by AAPL's low P/E for a long time, and would be

interested to know what assumptions the market is making for Apple's growth.

That's really quite straightforward to do. Apple's forward P/E is between 12x and 14x depending on which analyst you look at (and even that includes its cash).

 

Let's err on high side, and say it's 14x.

 

If Apple's rE = 14% (which is probably much higher than what it actually is; but I am penalizing Apple here, just to be on the safe side), that implies a "g" (long-run annual expected earnings growth rate) of 7%.

 

Considering Apple's current rate of earnings growth, even if the current growth where to fade rapidly in the next, say, six or seven years to no more than the global nominal GDP growth rate from Year 8 to forever, that is on the low side.

 

If, OTOH, you think that Apple's true risk-adjusted discount rate is closer to 12% (which is what I think it is, perhaps even 11%), we are talking about an implied g = 5% (or even 4%).

 

You be the judge!

 

(Edit: Cleaned up some language!)

Thanks for doing that.

Yeah, that is amazing.  I don't know what the market is picturing that would knock Apple down that far.  Maybe they expect a huge fiasco of a product release pretty soon.

post #61 of 76
Quote:
Originally Posted by Tallest Skil View Post

 

Running a company whose market cap is half of Apple's quarterly revenue.

Comparing market cap to market cap, Apple is just over 28 times more valuable.

post #62 of 76
Quote:
Originally Posted by Azu Kiposi View Post


Same here, I can't even sell it, because there's no better alternative to buy 1smile.gif

 

Only reason anyone might want to get out now would be the looming capital gains increase. I'll be holding on through the next president... whoever they may be.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #63 of 76
Congrats Apple! Too bad Steve didn't live to see this.
post #64 of 76
Quote:
Originally Posted by Buzzz View Post

Congrats Apple! Too bad Steve didn't live to see this.

 

He set them on their current path... one that includes "evergreen" properties that continue to pay over time, instead of let Apple sink into the standard "feast or famine" of product release, feast, development cycle, famine, repeat...

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #65 of 76
Quote:
Quote:
Originally Posted by quinney View Post

Thanks for doing that.
Yeah, that is amazing.  I don't know what the market is picturing that would knock Apple down that far.  Maybe they expect a huge fiasco of a product release pretty soon.

Yes, I do find it puzzling how little growth is built into Apple's share price today.

I think it is for a completely unscientific reason (but have no evidence to prove it one way or another): people just can't wrap their minds around the concept of a company with such a high market cap that can continue to grow. There are no other examples one can think of. They use weasely words like "law of large numbers" and such, but I have no clue what they mean.
post #66 of 76
Apple is NOT the most valuable company in the world... Petrochina's market cap is $722 billion
http://www.theinquirer.net/inquirer/news/2199995/apple-fails-to-become-the-most-valuable-company
post #67 of 76
Quote:
Originally Posted by Tallest Skil View Post

But… that one Chinese company…

 

Anyway, when it falls back to $580 after the fall keynote, Apple will be doomed™ all over again, so it's all cool. lol.gif

But...that one Chinese company (state-owned PetroChina) ... was only valued at that amount on the Shanghai stock exchange, possibly due to overhyped estimates of its worth by the Chinese government; in the rest of the world it never approached that number or what Apple is now. As for Apple being doomed do you want to hold your breath on that one? I wouldn't.

post #68 of 76
Quote:
Originally Posted by 69ergoo View Post

Hey Samsung Chairman Mr. Lee, are you looking at this news? I bet you will not be able to sleep for a few days. American jury will deliver Samsung another big blow come this Friday. Get ready to spit out huge chunk of cash! Apple will become fatter and fatter....they'll gonna have hard time digesting all that cash. I'm in the middle of persuading my wife to get iPhone 5...because that's the only way I can get my hands on it. Wish me luck fellow Apple maniacs!

Here's wishing you luck.

post #69 of 76
Quote:
Originally Posted by urungus View Post

Apple is NOT the most valuable company in the world... Petrochina's market cap is $722 billion
http://www.theinquirer.net/inquirer/news/2199995/apple-fails-to-become-the-most-valuable-company

This was just briefly, post-IPO when few of its shares were available and the price got bid up artificially.
post #70 of 76
Originally Posted by Radar View Post
…in the rest of the world it never approached that number or what Apple is now.

 

But it WAS publicly listed, correct?

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
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post #71 of 76
Quote:
Originally Posted by jragosta View Post


That's not what you said. You said:
"That makes zero sense. Value is value. Inflation is in both the numerator (cash flows) and denominator (cost of capital) in all valuation."
Your new statement is closer to the truth. 

If you can't see that my first statement:

"Inflation is in both the numerator (cash flows) and denominator (cost of capital) in all valuation."

Your new statement is closer to the truth. "

 

is exactly the same as the second statement:

"The nominal (expected) value of a stock is nothing more, nothing less than a function of two fundamental variables: nominal expected future cash flows .... and the market's discount rate (expected return) for the stock, taking into account its expected growth prospects ...."

 

... I don't know what to say!

post #72 of 76
Quote:
Originally Posted by melgross View Post


I don't believe it will drop back to $580, unless the world becomes overly worried about the problems in the EU at the same time.

Try Grexit.

post #73 of 76
Quote:
Originally Posted by SpamSandwich View Post

 

Only reason anyone might want to get out now would be the looming capital gains increase. I'll be holding on through the next president... whoever they may be.

Do you have specific plans depends on who win?

post #74 of 76
Quote:
Originally Posted by Tallest Skil View Post

 

In 2003, who would have ever guessed!

I did, proud to say it and the haters can't laugh at me no more! :)

post #75 of 76
Quote:
Originally Posted by Tallest Skil View Post

 

But it WAS publicly listed, correct?

Listed, check. Overvalued by the CPC and the Xinhua News agency (who have a penchant for making absurd claims), also, check.

 

"SHANGHAI, China — What the Shanghai stock exchange giveth, Wall Street taketh away.

Hours after PetroChina shares almost tripled in value on their first day of trading in Shanghai, they slumped 13 percent in New York after a big investment bank said the stock was overvalued  ... Indeed, when measured by earnings, Exxon remains a much larger company. Its $9.41 billion in third-quarter net profit, while down 10 percent from a year earlier, nearly matched PetroChina's net profit of 81.8 billion yuan ($10.8 billion) for the entire first half of the year...." 

 

You can read the rest here if you like... http://www.usatoday.com/money/economy/2007-11-04-1494307240_x.htm

post #76 of 76

FWIW Google has now passed Microsoft too according to Bloomberg

http://www.bloomberg.com/news/2012-10-01/google-passes-microsoft-s-market-value-as-pc-loses-to-web.html

 

Microsoft's best days may be behind them.

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