50M iPhone sales, 'booming' iPad mini expected in Apple's holiday quarter - Page 2

Huh?

I'm simply addressing Apples low P/E. There is nothing apocalyptic here at all, but rather the reality that as a owner you have to be concerned about how the company will grow in the future and how the company will sustain itself if a product like iPhone suddenly falls out of favor.

Take you example of banks, there is some volatility with bank stocks but the reality is the need for banks will not go away and competition is pretty structured. In other words the future is pretty well known. Another example is MS where even as badly performing as they have been lately they still have a better P/E than Apple, why, because they are entrenched in the corporate world which assures at least some income for the foreseeable future. Apple on the other hand is very open to competition (which may happen one day) and has extremely limited product offerings that can easily fall out if favor.

So in a nut shell where is the justification for a higher P/E with Apple? What? I really didn't think I had the tone turned up. I just hit upon reasons why Apple doesn't have the high P/E that everybody thinks it should have. Frankly that was three out of many. There is much risk still in investing in Apple. Volatility and the low P/E are two different things. In the case of Apple volatility is related to speculation and manipulation. The low P/E is almost entirely due to risk. Much of that perceived risk is due to the product line up.

Think about this for a bit, how many companies in modern history have become so large on so few products? Not many I would have to say. Now I can look across town at Kodak Park and look at an industrial wasteland that use to employ thousands. Kodak was a fair bit more diversified than Apple yet had one product as their primary cash cow, that cow dried up real quick and the company feel real hard. Apple is similarly exposed and could suffer a similar fate with iPhone, iPad or a number of other products.

Then we have the issue of new products from Apple and which direction it intends to go. No body really knows what is up deep in the bowls of Apples engineering groups. Will the next exceptional product come from Apple or somebody else. You combine these two issues and I would imagine them having a significant impact on Apples P/E.

Now you can argue that everything is roses right now and that that should set P/E. I simply don't see it that way. Think about what wold happen is Google and Motorola actually came up with something that was arguably better than iPhone. It is unlikely that they would kill iPhone instantly but they could most certainly impact sales and profits. Google cold also remake itself into an organization not driven by ads, and thus offer a system that rivals the iTunes structure.

Apple, right now, is like a big guy standing on a tall stool. All it takes is the right kick for that stool to break a leg and cause the big guy to fall. Right now it is more or less a three legged stool with iPhone, IPads and iPods/iTunes representing the three primary legs. Macs at this point aren't even significant. All of these are subject to outside attack. In fact Apples overwhelming success has put some manufactures in a state of panic, which means they will be focused on trying to break those three legs to that stool Apple stands upon.

In the end a companies P/E is as much about uncertainty as it is about hard cold numbers from the last quarter.

Reading this thread I don't think people realize what can happen if a stock ends up being owned by the wrong people on Wall Street. Effectively the people that own the stock can and will tell management what to do if they end up owning a significant percentage of that stock. This is a significant risk for any company as you have to balance short term goals against long term goals. I'm not sure where this idea comes from. It is pretty obvious that a high share price effectively excludes certain types of investors. Get high enough and your only investors become institutional or extremely well off. My main concern is that very high stock prices bias stock ownership in a way that is often not good for the company. . That depends upon your goals. I certainly wouldn't invest myself in Apple though I do own through 401Ks. You should invest based on the economy and your investment goals (which are hopefully well thought out). However I'm using the word investing in a more pure form, what many people advocate here is really a form of gaming.

At this point I'm not sure what I would recommend as a stock investment for people with long term goals that is reasonably priced. The economy is likely to be in the trash can for at least a year or more and it is really hard to tell what companies will survive and prosper once things turn around. One thing for sure it won't be a Chrysler or GM stock (bad experiences there with the last two sets of wheels). Apple is simply too expensive and too risky for a single investor.

 

I don't think you know what you are talking about.

 

MSFT ($27.00) and AAPL ($542.00) have the same amount of institutional ownership: 67%

 

GOOG ($723.00) has 69%

 

INTC ($21.00) has 63%

 

QCOM ($64.00) has 81%

 

JNPR ($20.00) has 93%

 

Maybe others can see a pattern in this but to me it looks like institutional ownership has nothing to do with share price.

Exactly, most major company have a large % of institutional investors, some tell companies how to run their business and others do not. If anyone notice when Job's died the stock started to rocket up, it went up 150 points in no time and Apples fundamentals did not change before or after he died. So why did it take off, Wall Street hated Jobs, why because he told them all to F-off and did what he thought was right for Apple and did not care about ratios and metrics Wall Street set out for Apple to achieve. When he died they hoped Cook would be someone they could control.

 

Stock price has no baring on what % of stock is owned by institutions. also anyone who has a 401K and Mutual funds owns Apple via some large institution.

 

I will also tell you Wall street do not like closely held stocks, or one which are on majority owned by large institutions. I worked for a start up in the 90's which got it start without VC money. it went public and grow like crazy and most of the stock ownership was in the employee and founder hands, over 50% of it, Well wall street told the founder they would not invest in the stock since it was controlled by them and the employees. The stock price stagnate even with double digit growth it wasn't until the company began issuing more shares to dilute the value of the employees did the share price rise, Then they came in and demand all kinds of changed in how the business would be run.

 

As it was pointed out, there is small group of people who are only concerned about their profits on a stock and do not care about long term success of any company. Any company who is not providing the the short terms gains they want, they trash in the market place. You are seeing it with Apple right now.

The largest Apple shareholders are all large mutual funds, a number of them index funds that hold a large number shares to match their investment prospectus of having an asset portfolio that matches the distribution of a certain market segment.  

 

These large mutual funds don't care if Apple's share price is $542 or $54.20.  They have sufficient funds to purchase the Apple shares they want to/have to. And most of them do not buy and sell for the short-term to make profits now, they are investing for the long-term. 

 

Investing in mutual funds is actually the best way for most smaller investors to benefit from Apple's success while protecting against risk.  Lower fees than buying  and selling shares individually, and not all your eggs in one basket.  

 

I do not directly own Apple stock, but I benefit from stock price increases and any dividends Apple might pay because I own some of those mutual funds.

 

Here are the largest Apple shareholders, and the number of shares they own.  If you want to invest in Apple, consider one of them.

 

 

i don't want to get into a sematic argument. sure people with stocks and mutual funds held for years for retirement or college tuition are "investors." at the macro level the huge inflow of their savings into stocks beginning in the 1980's drove the market to its pre-crash peak. but that baby-boom driven big net influx is over as they reach retirement age or have been forced to cash out due to the Great Recession. the next gen is smaller and its investment savings couldn't replace all that, even if the economy were stronger. so that savings/investment macro will no longer automatically push stock prices up faster than inflation as it did for 20 years. and of course the market has yet to even get back to its peak of 5 years ago, inflation NIC. maybe this year.

 

so prices for active stocks today, like Apple, are driven not by long term "respectable portfolio" investors, with so many still on the sidelines and numbers diminishing overall, but the "traders" and the "speculators." they are playing the market for quick/medium term profits. including the shorts and options especially. hype is a key tool for them. Amazon is the pluperfect example of an absurd stock price propped up by pure hype. near an all time high of $258 - almost half the price of Apple stock - with EPS <$0 compared to Apple's $44! if that isn't the Greater Fool theory in action, what do you call it? there is too much over-hyped crap in this market.

 

given the state of the world today, buy gold instead of stocks if you want a passive investment. if you really have equity to invest actively, open a business or buy income real estate.

... and the vast majority of mutual funds have a price geared to the public.

 

I don't recall saying that.

 

Windows 8 must be infinitely better than OS X. Sales are the only thing that matter.

 

¡ removed, as it's not even needed.

 

 

Seriously, don't read stuff like that! Seeking Alpha is the second most full of shit financial site on the net.

 

Second only to Valuewalk.

Wizard's apocalyptic and could-be-toned-down examples:

-massive exposure when investing in Apple

-product line is stagnate and extremely narrow. 

-the iMac release fiasco and Apples inability to ship enough iPhones to meet demand

-to put it simply Apple is a high risk investment, one screw up, a little trip here or there can significantly impact earnings.
-Apple really needs to pull head from behind with respect to the product line up

-to this day drives more customers away than it attracts

-perception that Apples products are for the elite and wealthy

-Apples pricing approach in the last few years has done more harm than good.
-Basically Apple is a house of cards that can come tumbling down when any one card has a bit of trouble

 

Listen, and as I said before, each has some merit, but when you ratchet up each issue it definitely sounds apocalyptic.

-There's exposure, not massive exposure.

-Product line is not stagnant in many ways as each iteration of each product line is getting better and with technology improvements made to hardware AND software... not without hiccups, but to say it's stagnant without at least some mention of innovation is untrue.

-As for iPhones, while there were some quality issues in this ONE LAUNCH, you also need to factor in the overwhelming DEMAND.

-Apple is not any a higher risk investment...again, show me a company that has comparable annual returns with less risk.  One screw up...Huh?

-what numbers (or anecdotal evidence) are you referring to that leads you to believe that it's driving more customers away than it attracts...because Apple is attracting quite a fair number of customers in its target space.

-perception is NOT that it's for the elite and wealthy...high quality/upper grade, yes...but not elite/wealthy.

-what pricing approach has done more harm than good?

-house of cards is equivalent to saying, "imminent collapse".

 

Would all of us want improvement in the above?...heck yah.  But your house of cards quickly/conveniently dismisses the fact that Apple's brand is still top 5 in the WORLD, that Apple's software/ecosystem is a large and embedded platform, and that Apple's product lines are evolving in a deliberate and successful way.

 

Modern day companies with few products, eh?  how about these types of companies which rely on few products: Oil, Automobile, Banking, Heavy Equipment, etc.

 

Yes, there's risk....depends on what price you're buying at.  At these levels, I'd take this risk today...in comparison to any other company on the stock market.

To this I agree.  Though, not sure I would say, "easily pulled away".  Pulled away nonetheless.  I've gotten into many an argument with others on this board in regards to price structure of flash upgrades (and other upgrades).  I'm sure Apple is paying attention to this issue, but maybe slow to react (and conservatively erring on the side of higher profit margins).

I not making any claims about their conclusions, but the analysis which is based on the numbers is right on, this tell the story why wall street is not happy with Apple at this time. Weather it is fair or not does not matter at this point.