Originally Posted by Constable Odo
And exactly what has any of this done for Apple shareholders? Nada! Apple still seems to be limping along at a snail's pace with the cries of doom still being tossed at it. I just don't get it at all. How can things like this mean absolutely nothing to potential investors. Apple's P/E is still very conservative compared to rivals. However, that may be due to Apple's large market cap. I really don't know what to think anymore when it comes to Apple's income and how it's related to shareholder value. If that $10 billion is more than Google earned last quarter than why is Google sitting at well over $1000 a share and Apple stays capped at around $530 a share. That's insane.
Stock valuations, and in the aggregate market capitalization, are only indicative of what the investing market thinks holding a stock may be worth. It is not a 'true' valuation of the company. If today’s stock price is $500, and there are 900M shares, that only means an investor is more likely to find a buyer or seller for stock in close proximity to $500.
You can maybe find a desperate seller willing to take less, or a desperate buyer who will pay more. And that’s constantly happening, resulting in wildly changing prices. This is not necessarily rational, just as the lane changing behaviors of individual drivers is often apparently insane to other drivers who happen to have different motivations for the decisions they make (ie. how much of a hurry they are in vs. how much they are willing to risk causing a collision).
When you look at things from that perspective, it explains why a solid company like Apple, which faces some risks and challenges but has a strong history of outperforming the market and successfully entering new ones, can have an insanely low valuation for a period of time due to false information and simply wrong headed investors.
Apple is currently set up with the ability to survive major global shifts and a significant economic downturn. A company driving insanely fast and having zero safety zone for maneuvering, like the wildly profitless Amazon, could easily crash and burn in the next bubble. A one trick pony like Google could run into a major problem if, say, there was a major lawsuit targeting its primary successful business.
Recall that in 2008, Apple’s stock ran up and fell down repeatedly, doubling and collapsing in half throughout the year back and forth. That’s insane. But two years later it was up about 2x each year, and in 2012 it exploded. This year it flattened out, giving back all the progress from 2012. But that was based purely on false information and threats that failed to materialize.
Apple now has the only tablet that matters, has increasing phone strength as Samsung and Google become enemies and are unable to report continued high end growth, and Microsoft Windows is imploding. Apple is building the world’s largest tech R&D center and financing global shifts in Application Processor fabrication.
If Android couldn’t sell demonstrably better 4G LTE handsets vs iPhone 4/4S while it had the exclusive through the end of 2012, imagine how bad its going to get next year, as Android demonstrably falls behind and looks increasingly stale and slow moving as Google doubles down on very low end devices with 512MB of RAM as Apple continues to sell 64-bit machines with better battery life and advanced exclusive features like Touch ID.
Now as an investor, you’re only cranky about how much money you have. But that in itself helps to illustrate how irrational and misguided investors are. You can fume at "the market" for being "insane" in their valuations, but really its just a bunch of people like you who are making decisions based on faulty or incorrect thinking.
It’s rather like being on a freeway with heavy traffic and complaining about other people’s decisions to drive on your route. You’re really just part of the problem. If you can’t take the traffic, stay off the highway. If you like driving without stop signs deal with the freeway having traffic, because a lot of people are doing the same as you for the same reasons.