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Apple, Inc. valuation passes $500 billion, half the market cap imagined last year - Page 2

post #41 of 73
Quote:
Originally Posted by cws View Post

While I believe AAPL shares have considerable upside, I'm compelled to note that this article ignores a quite valid factor contributing to the lack of enthusiasm for AAPL stock among investors: the company's profit growth absolutely stalled, beginning with the December quarter of 2012, and has yet to recover.

With respect to the 2008 gyrations, this article also tendentiously ignores yet another legitimate factor: the 2008-2009 financial crisis, which severely affected the price of nearly all equity securities. With the world economy sinking into a deep recession, it was only natural that investors would flee from stocks of companies with a luxury or premium brand reputation.

Bottom line: the market is not as irrational as Mr. Dilger would have us believe. Stock prices ultimately are based on profits, not revenues. Unless AAPL can restore its ability to grow profits, then its stock price will not be able to sustain an upward trajectory.

Wait a sec—when Apple shares collapsed in 2008 in, as you point out, the midst of a global crash, Wall Street was being irrational, not rational! Apple was on a tear in 2008; there was no good reason for their share price to suddenly drop 40%.
post #42 of 73
Quote:
Originally Posted by Benjamin Frost View Post

Re Amazon: yes, it's amazing that they still seem to be treated like a start-up by Wall Street! My feeling is that when the internet was still the Wild West, they were a breath of fresh air. Now, I think that consumers and companies are wising up to the internet. Consumers realise that the web isn't so scary and Amazon isn't always the cheapest. Because Amazon has no compelling differentiator, they will never be able to command substantial profits. Low prices are their Raison d'être, regardless of how much people might draw attention to their convenience.

I view their share price a bit like Blackberry's in 2008; built on sand.

The same could be said about Walmart, yet how long have they been around? It isn't always about best price but about trust and convenience. People will pay Amazon because they trust the site and if they're Prime members that they'll get free 2 day shipping on most items.
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post #43 of 73
Quote:
Originally Posted by Benjamin Frost View Post

Wait a sec—when Apple shares collapsed in 2008 in, as you point out, the midst of a global crash, Wall Street was being irrational, not rational! Apple was on a tear in 2008; there was no good reason for their share price to suddenly drop 40%.

If they absolutely needed the cash it was rational but if it was out of fear then it was irrational. Those that stayed the course or bought in back then is smiling right now.
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post #44 of 73
Quote:
Originally Posted by dasanman69 View Post

The same could be said about Walmart, yet how long have they been around? It isn't always about best price but about trust and convenience. People will pay Amazon because they trust the site and if they're Prime members that they'll get free 2 day shipping on most items.

At no point in Walmart's history did they ever have a valuation anywhere approaching Amazon's, so your comparison is moot.
post #45 of 73
Quote:
Originally Posted by dasanman69 View Post

Unfortunately you're going to be waiting a long time. Though Amazon loses money it is not because business is slow, they're doing a ton of business but at low margins.

I agree. I actually love Amazon so don't agree with TS's desires to see them die. I don't want to go back to shopping the old way!
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post #46 of 73
Originally Posted by digitalclips View Post
I agree. I actually love Amazon so don't agree with TS's desires to see them die. I don't want to go back to shopping the old way!

 

I just want the stock knocked down a peg. Force Wall Street to return to reality about Amazon, is all. I do all my large shopping online. Best Buy’s just the Internet’s showroom to me. A company that has NEVER MADE A PROFIT shouldn’t see its stock keep going up.

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post #47 of 73
Quote:
Originally Posted by Tallest Skil View Post

I just want the stock knocked down a peg. Force Wall Street to return to reality about Amazon, is all. I do all my large shopping online. Best Buy’s just the Internet’s showroom to me. A company that has NEVER MADE A PROFIT shouldn’t see its stock keep going up.

I actually owned a bit of AMZN, pre- and post-Dotcom crash. It never moved until the last couple of years and I bailed as soon as it went up enough for me to make a tiny profit. Amazon is an insane business, so it only makes sense the stock price would act in an insane fashion.

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post #48 of 73
Quote:
Originally Posted by Tallest Skil View Post
 

 

I just want the stock knocked down a peg. Force Wall Street to return to reality about Amazon, is all. I do all my large shopping online. Best Buy’s just the Internet’s showroom to me. A company that has NEVER MADE A PROFIT shouldn’t see its stock keep going up.

 

Force Wall Street to return to reality? You're the one that needs to come back to reality.

 

More of people believe in Amazon and its growth potential than Apple.

Amazon has $4.98 billion operating cash flow, over 109,000 full-time and part-time employees, 70,000 seasonal contract employees, more than 2,400 education institutions and 600 government agencies as AWS customers.

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post #49 of 73
Originally Posted by Russell View Post

More of people believe in Amazon and its growth potential than Apple.

 

So losing money for a decade is growth potential?

 
Amazon has $4.98 billion operating cash flow, over 109,000 full-time and part-time employees, 70,000 seasonal contract employees, more than 2,400 education institutions and 600 government agencies as AWS customers.

 

Apple has a bunch of stats, too. But they make billions of dollars every month.

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post #50 of 73
Quote:
Originally Posted by Tallest Skil View Post
 

 

So losing money for a decade is growth potential?

 

Apple has a bunch of stats, too. But they make billions of dollars every month.

In all fairness Amazon has been piling up infrastructure. I still shake my head but it seems to me the net loss is due not to an operating loss but an investment imbalance if you will…. Though as it's gone on forever…. yikes.


Edited by jfc1138 - 12/3/13 at 12:17pm
post #51 of 73
Quote:
Originally Posted by Tallest Skil View Post

So losing money for a decade is growth potential?

Apple has a bunch of stats, too. But they make billions of dollars every month.

Contrary to common sense investors see Amazon as a more sound business than Apple's.
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post #52 of 73
Originally Posted by jfc1138 View Post
In all fairness Amazon has been piling up infrastructure. I still shake my head but/...

 

In terms of what their business accomplishes, they’ve done a great job. Spearheading online shopping, offering hosting and data for people using their servers in off-peak times, etc. But as far as making money is concerned…

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post #53 of 73
Quote:
Originally Posted by Tallest Skil View Post
 

 

So losing money for a decade is growth potential?

 

Apple has a bunch of stats, too. But they make billions of dollars every month.

 

They are growing the business.

 

 

Quote:
Originally Posted by Tallest Skil View Post
 

 

In terms of what their business accomplishes, they’ve done a great job. Spearheading online shopping, offering hosting and data for people using their servers in off-peak times, etc. But as far as making money is concerned…

 

You obviously don't understand how the stock market works or how to grow a business. 

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post #54 of 73
Originally Posted by Russell View Post

They are growing the business.

 

O~kay.

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post #55 of 73
Quote:
Originally Posted by Russell View Post

They are growing the business.

Net sales last year for Amazon $61.9b, operating expenses $61.2b. Operating income was $690m, net loss of $39m. They try to make people think of expansion by saying things like:

"The increase in cost of sales in absolute dollars in 2012, 2011, and 2010 compared to the comparable prior year periods, is primarily due to increased product, digital content, and shipping costs resulting from increased sales, as well as from expansion of digital offerings."

They want investors to keep thinking about growth and ignore the fact that their expenses grow proportionally with their increased sales almost 1:1.

They spent $3.7b on property, website and $3.6b in investing and grew their cash with financing and investment activity.

If they can make the company look attractive, they can bring investors in that will pay more for shares. It all looks good until they stop growing. If the complexity of the scale of their operation becomes too much, the losses can keep increasing just as they have been.

They are valued at 1/3 of Apple but what happens if their losses keep increasing at the same rate, say $0.5b loss next year, then $1b and so on. Eventually they'll run out of assets to fund their losses. Maybe it'll run for 10-20 years and wipe out most other retail outfits but the growth will stop and the shareholders will realise they are holding stock in a company that has no means to give them any financial return. The stock value may even collapse as the market determines Amazon's intrinsic value and the same thing will happen with Apple, lots of bleating about how the shareholders who didn't sell lost money and how the management needs to be replaced and whatever other measures until someone else funds their losses.

Maybe they'll grow revenue up to match Walmart's $460b+. That can happen by growing revenue 25% for the next 10 years. But their stock price won't grow at the same rate because they aren't worth more than Apple. Somewhere in the next few years (I'd say 3 years), people are going to realise this and see that Walmart has a market cap of $264b with revenues of $460b with positive net income, now at $17b and growing not decreasing. That's while maintaining a retail chain and huge amount of staff that Amazon doesn't have. They are doing far better than Amazon while maintaining a more expensive infrastructure but only valued at 50% more than Amazon. The thing about online retail is that people aren't passionate enough (and are not required) to make use of a taser to get a good deal:

http://www.huffingtonpost.com/2013/11/30/woman-tasered-black-frida_n_4363767.html

They just click the next website along for a lower price so it demands the lowest price wins. There's some loyalty to trusted services but it'll only take a $5 difference to break that.

This looks to be the pump part of the pump and dump. If Amazon gets in the $550 region, people will see that it's not worth more than Walmart and likely the people who have been pushing it will start selling just above $500 or they might do what they did with Apple. Just keep hyping it as long as the big institutions see people buying. Then their computers start the big sell-off to profit and buy back in at a low price for more growth and security. Guaranteed profits for the investment banks and random wins for the gamblers on the outside.
post #56 of 73
Quote:
Originally Posted by Marvin View Post


Net sales last year for Amazon $61.9b, operating expenses $61.2b. Operating income was $690m, net loss of $39m. They try to make people think of expansion by saying things like:

"The increase in cost of sales in absolute dollars in 2012, 2011, and 2010 compared to the comparable prior year periods, is primarily due to increased product, digital content, and shipping costs resulting from increased sales, as well as from expansion of digital offerings."

They want investors to keep thinking about growth and ignore the fact that their expenses grow proportionally with their increased sales almost 1:1.

They spent $3.7b on property, website and $3.6b in investing and grew their cash with financing and investment activity.

If they can make the company look attractive, they can bring investors in that will pay more for shares. It all looks good until they stop growing. If the complexity of the scale of their operation becomes too much, the losses can keep increasing just as they have been.

They are valued at 1/3 of Apple but what happens if their losses keep increasing at the same rate, say $0.5b loss next year, then $1b and so on. Eventually they'll run out of assets to fund their losses. Maybe it'll run for 10-20 years and wipe out most other retail outfits but the growth will stop and the shareholders will realise they are holding stock in a company that has no means to give them any financial return. The stock value may even collapse as the market determines Amazon's intrinsic value and the same thing will happen with Apple, lots of bleating about how the shareholders who didn't sell lost money and how the management needs to be replaced and whatever other measures until someone else funds their losses.

Maybe they'll grow revenue up to match Walmart's $460b+. That can happen by growing revenue 25% for the next 10 years. But their stock price won't grow at the same rate because they aren't worth more than Apple. Somewhere in the next few years (I'd say 3 years), people are going to realise this and see that Walmart has a market cap of $264b with revenues of $460b with positive net income, now at $17b and growing not decreasing. That's while maintaining a retail chain and huge amount of staff that Amazon doesn't have. They are doing far better than Amazon while maintaining a more expensive infrastructure but only valued at 50% more than Amazon. The thing about online retail is that people aren't passionate enough (and are not required) to make use of a taser to get a good deal:

http://www.huffingtonpost.com/2013/11/30/woman-tasered-black-frida_n_4363767.html

They just click the next website along for a lower price so it demands the lowest price wins. There's some loyalty to trusted services but it'll only take a $5 difference to break that.

This looks to be the pump part of the pump and dump. If Amazon gets in the $550 region, people will see that it's not worth more than Walmart and likely the people who have been pushing it will start selling just above $500 or they might do what they did with Apple. Just keep hyping it as long as the big institutions see people buying. Then their computers start the big sell-off to profit and buy back in at a low price for more growth and security. Guaranteed profits for the investment banks and random wins for the gamblers on the outside.

 

Investing in Amazon is making a gamble on the future.  If Amazon's vision is correct, its investors will (continue to) do very well.  If not, you may be right with your doom forecast. 

 

I think part of investors faith lies in your own example.  Amazon is spending everything it makes to fund growth rather than throw it in a bank and pat itself on the back.  Those costs of expansion are included in the 'operating costs.'  If their market stopped looking like it could sustain their voracious growth what would happen in your scenario?

 

Since they no longer need to grow they would most likely stop spending $3.7b on new properties/fulfillment centers.  No sense building more of those if they are not expanding.  So if they stop expanding for one year they could post a $3.3b profit, which could support their expansion losses of $39mil for pretty close to the next decade of expansion.  If you look on their financials their revenues are growing at an impressive pace- from under $25b in 2009 to over $60b just 3 years later and no sign of slowing down.  You are right that their operating expenses have grown along with that but that is because they are dumping more and more into their growth as fast as they make it.  It surprises quite a few people to learn that Amazon substantially outspends Apple in R&D.

 

Right or wrong, investors aren't too worried about the $39 mil 'pocket change' losses and are content to have Amazon continue expanding to capture more and more of a market that dwarfs the individual markets of the products they sell (including cell phones and tablets).

post #57 of 73
Quote:
Originally Posted by Frood View Post

Those costs of expansion are included in the 'operating costs.'

The breakdown of the $61.2b lists cost of sales at $46b, which is just shipping, packaging and acquiring products for sale (equivalent to Apple's build costs). Fulfillment is $6.4b, which is payment processing fees and some of this is expansion of fulfillment capacity. $2.4b is marketing. $4.5b is their AWS web services, cloud computing costs. The following site says they're investing $13.9b over a number of years in warehouses:

http://www.bloomberg.com/news/2013-08-20/amazon-ramps-up-13-9-billion-warehouse-building-spree.html

and their total is 89 worldwide now. By contrast, Walmart has over 11,000 retail outlets:

http://corporate.walmart.com/our-story/our-business/locations/

They're going to have spend a lot more to match Walmart's capacity. With that many retail stores, Walmart can deliver items from local stores within hours, especially groceries.
Quote:
Originally Posted by Frood View Post

If their market stopped looking like it could sustain their voracious growth what would happen in your scenario?

Since they no longer need to grow they would most likely stop spending $3.7b on new properties/fulfillment centers.  No sense building more of those if they are not expanding.  So if they stop expanding for one year they could post a $3.3b profit, which could support their expansion losses of $39mil for pretty close to the next decade of expansion.

The expansion losses weren't $39m, that was their net loss. Even assuming they'd have an extra $3b+ (some of this will have come from the extra fulfillment capacity), that would be used up entirely with the next year of expansion.

More likely, the sales and costs would balance out to be almost the ratios they are at now but with a very small net profit. Remember, these are yearly figures too, not quarterly. If they made $3b net profit, that's less than 1/10th what Apple makes yearly and less than 1/5th Walmart.

Assuming this situation happens and the growth stops, what do they pay shareholders with? Whatever amount they have, it won't be close to the value they've put on the company. The only return the investment will give is any gains from people buying into the hype. If they don't sell before it levels out, they'll be stuck with an investment that can't give a decent return.

I hope that Amazon can keep growing and they get their costs under control to allow this to happen. Their delivery drones sound kinda neat. But, I highly doubt they will ever be a very profitable company when their business model is to undercut everyone else.
Quote:
Originally Posted by Frood View Post

It surprises quite a few people to learn that Amazon substantially outspends Apple in R&D.

I wouldn't say substantially:

http://www.appsruntheworld.com/menus/pageSecondaryLink/37/6
post #58 of 73
Figures that Google places a negative post, 3 days old, at the top of relevance.
Talk about bias..........................
post #59 of 73
Fortune has an interesting chart for investors. It would indicate Apple stock prices are primed to continue their recent rise.
http://tech.fortune.cnn.com/2013/12/04/apple-institutional-investors-pensions/
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post #60 of 73
Quote:
Originally Posted by Gatorguy View Post

Fortune has an interesting chart for investors. It would indicate Apple stock prices are primed to continue their recent rise.
http://tech.fortune.cnn.com/2013/12/04/apple-institutional-investors-pensions/

Which is bizarre, frankly. The time to buy is when everyone else is selling.

Proud AAPL stock owner.

 

GOA

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post #61 of 73
"iPhone crash of 2008"? Seriously? Has everybody forgotten the subprime mortgage crisis already? That's why AAPL's value was halved in 2008. People thought the world was going to end. Every stock suffered tremendously as people wanted to protect their money (or needed money to pay for skyrocketing interest).

There is ZERO similarity to 2013, where the economy was slow throughout and the stock markets boomed throughout. 2008 had nothing to do with Apple. 2013 had everything to do with (perception of) Apple.

Wow...
post #62 of 73
It is the stupidity of Korean "pride" that makes them spend Billions on trying to create illusion.
Only people they are fooling are themselves. Even Korean Americans won't fall for it.
post #63 of 73
Quote:
Originally Posted by Michael Suozzi View Post

It is the stupidity of Korean "pride" that makes them spend Billions on trying to create illusion.
Only people they are fooling are themselves. Even Korean Americans won't fall for it.

Not true, plenty of American companies spend billions trying to create an 'illusion'.
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post #64 of 73

Not AAPL !!!!!

Korea would rather fall on the sword than admit they are wrong.

Only American company I can think of off hand is Tesla that is creating illusion to buy $80K exploding cars.

But they don't spend billions to advertise them. But then again I stand corrected.........MSFT and the Surface is the only American company in the same trap.

post #65 of 73
Originally Posted by Michael Suozzi View Post
Only American company I can think of off hand is Tesla that is creating illusion to buy $80K exploding cars.

 

No FUD, please.

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post #66 of 73

What's a FUD.

F'in unrealistic delusion????

post #67 of 73
Originally Posted by Michael Suozzi View Post
F'in unrealistic delusion????

 

Close! “Fear, Uncertainty, and Doubt”, used in public relations or marketing to slander competitors’ products. 

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post #68 of 73
Quote:
Originally Posted by Tallest Skil View Post

Close! “Fear, Uncertainty, and Doubt”, used in public relations or marketing to slander competitors’ products. 

And politicians alike
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post #69 of 73
Quote:
Originally Posted by Michael Suozzi View Post
 

Not AAPL !!!!!

Korea would rather fall on the sword than admit they are wrong.

Only American company I can think of off hand is Tesla that is creating illusion to buy $80K exploding cars.

But they don't spend billions to advertise them. But then again I stand corrected.........MSFT and the Surface is the only American company in the same trap.

 

Off-topic, I know, but I wasn't aware that Tesla made exploding cars. Can you provide a citation?

post #70 of 73
Quote:
Originally Posted by s.ballmer View Post

Off-topic, I know, but I wasn't aware that Tesla made exploding cars. Can you provide a citation?

First you had my interest... Now you have my attention.

Proud AAPL stock owner.

 

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post #71 of 73
Quote:
Originally Posted by s.ballmer View Post

Off-topic, I know, but I wasn't aware that Tesla made exploding cars. Can you provide a citation?

Maybe the guy in charge of ordering parts is French and asked for plastique instead of plastic. lol.gif


http://mobile.bloomberg.com/news/2013-10-04/scariest-tesla-explosion-was-its-stock-price.html
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post #72 of 73
Quote:
Originally Posted by s.ballmer View Post
 

 

Off-topic, I know, but I wasn't aware that Tesla made exploding cars. Can you provide a citation?

 

I can:

 

post #73 of 73
Originally Posted by fastasleep View Post

I can:

 

 

It’s the… whatever this game is called.

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