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Shares of Apple reach highest-ever closing price as 'iPhone 6' & 'iWatch' hype builds - Page 2

post #41 of 61
Quote:
Originally Posted by digitalclips View Post

I keep waiting SpaceX to go public.

Absolutely. Have you seen the new multi-passenger rocket passenger cabin for future space travel? SpaceX is the most forward-looking space company today, IMO. I would get in on the ground floor of their IPO.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #42 of 61
Quote:
Originally Posted by digitalclips View Post


Not my area ... but shouldn't there be some sort of formula that corrects for that, else how can you ever compare different companies let alone situations like this?

 

No formula needed. In theory, when Apple purchased back it shares, the price of each outstanding shares goes up in value, to make up for less outstanding shares. It's already built into the price of the stock. I remember AAPL going up after Apple announced their buyback plan and then it going up again when they announced how much they already bought back. The buy back also added a few pennies to Apple numbers with their earning per shares, when they announced last quarter earnings. Which might have helped AAPL in going up the next day. Instead of going down, which is what usually happens after Apple earnings. But buying back shares is not the only factor that moves a stock. How much of this $100+ of AAPL share is due to the buy back is anyones guess. But if it weren't for the buy back, AAPL mostly wouldn't be at $100+ today. But that's not to say that it wouldn't be close to $100 or wouldn't be $100+ next week or maybe hit it last week.  

 

The market cap of a publicly traded company is what it is .......... the value of a share  X  the number of outstanding shares. There is no compensating, because there's less shares today than in the past, because it's already part of the share price today.  

post #43 of 61
Quote:
Originally Posted by DavidW View Post
 

 

No formula needed. In theory, when Apple purchased back it shares, the price of each outstanding shares goes up in value, to make up for less outstanding shares.

Not really.  I mean yes, the price of each share might go up, but that's the market just being the market and reacting with expectation and re-evaluation on every action.  It doesn't have a direct relationship though, since the value of the company is decreasing because it using cash (or debt) to buy back those shares.  The overall value of a company will include all of its cash and debt, so when cash goes down (or debt goes up), value goes down.

 

If you want to compare Apple's position then with now in terms of market cap, you could add Apple's total expenditure on the share buyback to today's market cap.

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post #44 of 61
Quote:
Originally Posted by melgross View Post


Of course, with all the talk about what makes a share worth what it is, ultimately, share prices are irrational. So we look at the average P/E in the industry, and it think it's about 17.5. Apple's is lower, so it could lead to a higher share price to meet that average. But what does that average really mean? Well, not much. In reality, it's just a feeling that P/E should be priced at where it is.

And how does one account for Amazon, with it's 830 P/E. Surely, irrational exuberance.

 

Amazon's PE is justified by the present value of future cash flows.

 

Its justified by assuming Amazon will grow revenue by 500% in the next 10 years (basically the size of Walmart) and then increase prices by 2-3%.  Then it will generate profits that will move the PE to 30.

 

Are those assumptions realistic?  I say no. 

post #45 of 61
...and the road to $167 continues!
post #46 of 61

While I hope SpaceX goes public at some point, I don't think it would be good at this point. Too many cooks...

What SpaceX really needs is a strong lobbying group to counter the growing anti-SapceX lobbying in government by ULA and it's cronies!

SpaceX is going up against some very powerful people that control many hundreds of billions of dollars. They are already trying to sick the government oversight police on them for launch delays.

post #47 of 61
Originally Posted by krreagan View Post
While I hope SpaceX goes public at some point, I don't think it would be good at this point. Too many cooks...

 

Indeed. I think they need to be further along in their design and construction stages of both the manned Dragon and the Mars Colonial Transporter before they go public. They need to have a manned Dragon built and successfully launched once and the designs and specs for the MCT finished. Then they should hit up the stock market for funding to do the latter.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #48 of 61
Quote:
Originally Posted by anantksundaram View Post

Amazon is, indeed, ridiculously valued. When there are thousands of stocks traded, there are always outliers here as anywhere else (Tesla is another one, IMHO).

A few examples like that do not necessarily extrapolate to irrationality in relation to the market as a whole, or to relatively more mature businesses.

I'm not saying that the entire market is irrational, but it isn't exactly logical either.

All financial formulary for valuations are ad hoc. It's decided that one thing or the other means something, and is given a value. But all of that is just assumed to mean what it means. There is no "natural" P/E, for example. It's just decided that a particular P/E is appropriate for an industry. I and whatever the actual P/E is is assumed to be "right". But that's nonsense. It's all just feelings that something is right.
post #49 of 61
Quote:
Originally Posted by sog35 View Post

Amazon's PE is justified by the present value of future cash flows.

Its justified by assuming Amazon will grow revenue by 500% in the next 10 years (basically the size of Walmart) and then increase prices by 2-3%.  Then it will generate profits that will move the PE to 30.

Are those assumptions realistic?  I say no. 

Now, that is nonsense! The reason why Amazon is priced where it is is simple. Bezos has convinced Wall Street that someday soon, Amazon will be making big profits. That's pretty much all it is. Once it's understood that it's impossible, going by their business model, the heyday of Amazon's stock price will be over.

If it moves P/E to 30, then the stock will plummet. At about a P/E of 830 now, and a stock price of about $330, that will leave investors hanging off a cliff. If the stock remained where it is now, while those sales and profits ballooned, then it might work, as the P/E slowly dropped. But the stock could continue going up during this time, whereupon, it would crash.

Going by any normal standard, Amazon should be no more that 30 now. It's a retailer, mostly, with unprofitable hardware lines, and generally, no profit. So the stock could be fairly priced at $15.
post #50 of 61
Quote:
Originally Posted by Tallest Skil View Post

Indeed. I think they need to be further along in their design and construction stages of both the manned Dragon and the Mars Colonial Transporter before they go public. They need to have a manned Dragon built and successfully launched once and the designs and specs for the MCT finished. Then they should hit up the stock market for funding to do the latter.

We can forget the Mars transporter. There is no evidence that people can survive a trip to Mars. The interplanetary radiation is so intense that no normal ship could carry people in safety.

Two of the ideas being thought about are either too difficult, too expensive, too dangerous in their own right, or all three.

One idea is to encase the life module in 10,000 tons of ice to absorb the radiation. The second is to develop a magnetic field around the ship similar to the one Earth has, to bend radiation around the module.

The first would require a power source for the engine too big to be practical. Also, getting that much ice around the ship would be extremely difficult.

The second is also very expensive, and secondary radiation from the generation of the field itself could kill the passengers.

Until they solve this problem, all talk of Mars is just talk.
post #51 of 61
Quote:
Originally Posted by melgross View Post

I'm not saying that the entire market is irrational, but it isn't exactly logical either.

All financial formulary for valuations are ad hoc. It's decided that one thing or the other means something, and is given a value. But all of that is just assumed to mean what it means. There is no "natural" P/E, for example. It's just decided that a particular P/E is appropriate for an industry. I and whatever the actual P/E is is assumed to be "right". But that's nonsense. It's all just feelings that something is right.

 

While I agree that there is 'no natural PE' and that 'appropriate' PEs can vary by industry, it is far from an ad hoc formula. Indeed, it has a rather precise meaning, couched in two specific fundamentals: the return expected from the stock (which is based on its risk), and the expected long-run growth rate in earnings.

 

Let me explain with some simple algebra. (I will make some simplifying assumptions without any loss of generality). Assume that the Earnings (E) of a company equal its cash flows. Call the forecasted earnings for Year as1 E1, for Year 2 as E2, etc., and call the expected return on the stock 'R'.

 

The Price of the stock (i.e., the earnings capitalized) today is then just:

P = [E1÷(1+R)] + [E2÷(1+R)2] + [E3÷(1+R)3] + ........ ∞

 

Now, assume that investors can forecast (ex-post rightly or wrongly) E1. While we can certainly agree that there is no reasonable way to forecast E2, E3, etc., assume that investors (or analysts) can come up with an estimate of the long-run annual expected growth rate in earnings. Let's call it G. The formula above (applying some basic algebra) then becomes:

P = [E1÷(1+R)] + [E1×(1+g)​÷(1+R)2] + [E1×(1+g)2÷(1+R)3] + ........ ∞ = E1/[R – G]

 

Bringing E1 to the left side,

P/E1 = 1/[R – G]

 

(Of course, the P/E1 is what we call the forward price-earnings ratio.)

 

Thus, when we use the term 'PE ratio', we are implicitly making a statement about a stock's perceived risk (the higher the risk for a given level of earnings, the lower the PE), and its earnings growth rate (the higher that number for a given level of earnings, the higher the PE -- from whence comes the notion that 'high-growth stocks have higher PEs').

 

Thus, when we're using a PE ratio as an indicator to buy a share we are implicitly making an assumption about its risks and growth. If we're buying it at the current PE, we're essentially saying that we're making a bet that its risk is lower than what the market currently thinks it is, and/or its earnings growth will be higher than what the market thinks it currently is.

 

(PS: I am not making any of this up; it can be found in most finance textbooks).


Edited by anantksundaram - 8/20/14 at 12:35pm
post #52 of 61
Originally Posted by melgross View Post
We can forget the Mars transporter. There is no evidence that people can survive a trip to Mars. The interplanetary radiation is so intense that no normal ship could carry people in safety.

 

You have to be joking. It’s not the ‘40s. The Van Allen belts won’t kill us all. A trip to Mars is less dangerous than smoking for 20 years. You would reduce a person’s chance of getting cancer if you recruited a smoker, took away their cigarettes, and shot them up to Mars.

 
The second is to develop a magnetic field around the ship similar to the one Earth has, to bend radiation around the module.

 

I can see one being used for the orbital insertion of a Jupiter mission. A manned trip to Ganymede or Callisto isn’t the difficult part, it’s the fact that Jupiter’ll kill you dead if you get too close. Europa’s off-limits to humans for probably the rest of this century.

 
Until they solve this problem, all talk of Mars is just talk. 

 

A 2 year, 4 month trip nets you a single Sievert extra. That’s a 5% increase in cancer risk. IT’S. MARS. People will take that risk. Never mind that the base can be shielded with soil to reduce exposure during the longest part of the trip.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #53 of 61

amazing: how did we get from Apple's share price to Mars and Jupiter?

Originally Posted by Rickers - 2014

Cook & Co will bury Apple.  They can only ride Steve's ghost for so long.  Steve == Apple and Apple == Steve.  

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Originally Posted by Rickers - 2014

Cook & Co will bury Apple.  They can only ride Steve's ghost for so long.  Steve == Apple and Apple == Steve.  

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post #54 of 61

speaking of returns. I really don't know why I keep long on Apple. I have 300 shares bought on a basis of 68. Now I admit that is a fine profit on paper. But I have been trading : ONNN, PFE, AEO, BRCD, BBRY and have made about $5000 in a few short weeks . I just can't seem to get up the nerve to sell my apple stock. I'm tying up buying power. In one week BRCD went from 8.5 to 9.5. and I made over  $1000. To make 1000 on apple it has to move from 100 to 104. now admittedly it has rolled up and down about that in a month but never in a week. I have AAPL allocated to my conservative account. But it sure is tempting to use that capital for more volatile securities. If it goes over 115 on the rally up to product announcement it will be difficult not to sell and take profits!

Originally Posted by Rickers - 2014

Cook & Co will bury Apple.  They can only ride Steve's ghost for so long.  Steve == Apple and Apple == Steve.  

Reply

Originally Posted by Rickers - 2014

Cook & Co will bury Apple.  They can only ride Steve's ghost for so long.  Steve == Apple and Apple == Steve.  

Reply
post #55 of 61
Quote:
Originally Posted by Paul94544 View Post

amazing: how did we get from Apple's share price to Mars and Jupiter?

Because AAPL is going to 'infinity and beyond'?

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #56 of 61
Quote:
Originally Posted by anantksundaram View Post

While I agree that there is 'no natural PE' and that 'appropriate' PEs can vary by industry, it is far from an ad hoc formula. Indeed, it has a rather precise meaning, couched in two specific fundamentals: the return expected from the stock (which is based on its risk), and the expected long-run growth rate in earnings.

Let me explain with some simple algebra. (I will make some simplifying assumptions without any loss of generality). Assume that the Earnings (E) of a company equal its cash flows. Call the forecasted earnings for Year as1 E1, for Year 2 as E2, etc., and call the expected return on the stock 'R'.

The Price of the stock (i.e., the earnings capitalized) today is then just:
P = [E1÷(1+R)] + [E2÷(1+R)2] + [E3÷(1+R)3] + ........ ∞

Now, assume that investors can forecast (ex-post rightly or wrongly) E1. While we can certainly agree that there is no reasonable way to forecast E2, E3, etc., assume that investors (or analysts) can come up with an estimate of the long-run annual expected growth rate in earnings. Let's call it G. The formula above (applying some basic algebra) then becomes:
P = [E1
÷(1+R)] + [E1×(1+g)​÷(1+R)2] + [E1
×
(1+g)2÷(1+R)3] + ........ ∞ = E1
/[R – G]


Bringing E1 to the left side,
P/E1 = 1/[R – G]

(Of course, the P/E1 is what we call the forward price-earnings ratio.)

Thus, when we use the term 'PE ratio', we are implicitly making a statement about a stock's perceived risk (the higher the risk for a given level of earnings, the lower the PE), and its earnings growth rate (the higher that number for a given level of earnings, the higher the PE -- from whence comes the notion that 'high-growth stocks have higher PEs').

Thus, when we're using a PE ratio as an indicator to buy a share we are implicitly making an assumption about its risks and growth. If we're buying it at the current PE, we're essentially saying that we're making a bet that its risk is lower than what the market currently thinks it is, and/or its earnings growth will be higher than what the market thinks it currently is.

(PS: I am not making any of this up; it can be found in most finance textbooks).

I understand the underlying financial reasoning. But as someone who has has several years of calc, and two years of statistics, I also understand that formulas such as this have little meaning. Someone decided that they were going to come up with a formula to describe a given vehicle, and we see the results. It doesn't mean that the math describes anything real. Someone has to decide what the terms mean, and why they have meaning. Afterwards, everyone just assumes the math is correct.

In other words, when an industry has an average P/E of 10, by fudging around with the numbers input into the formula, we can come up with a reason it should be 10, rather than 15. Still doesn't mean anything other than it is 10 because it is 10.
post #57 of 61
Quote:
Originally Posted by Tallest Skil View Post

You have to be joking. It’s not the ‘40s. The Van Allen belts won’t kill us all. A trip to Mars is less dangerous than smoking for 20 years. You would reduce a person’s chance of getting cancer if you recruited a smoker, took away their cigarettes, and shot them up to Mars.

I can see one being used for the orbital insertion of a Jupiter mission. A manned trip to Ganymede or Callisto isn’t the difficult part, it’s the fact that Jupiter’ll kill you dead if you get too close. Europa’s off-limits to humans for probably the rest of this century.

A 2 year, 4 month trip nets you a single Sievert extra. That’s a 5% increase in cancer risk. IT’S. MARS. People will take that risk. Never mind that the base can be shielded with soil to reduce exposure during the longest part of the trip.

I did say interplanetary radiation. Nothing to do with Van Allen.
post #58 of 61
Quote:
Originally Posted by Paul94544 View Post

speaking of returns. I really don't know why I keep long on Apple. I have 300 shares bought on a basis of 68. Now I admit that is a fine profit on paper. But I have been trading : ONNN, PFE, AEO, BRCD, BBRY and have made about $5000 in a few short weeks . I just can't seem to get up the nerve to sell my apple stock. I'm tying up buying power. In one week BRCD went from 8.5 to 9.5. and I made over  $1000. To make 1000 on apple it has to move from 100 to 104. now admittedly it has rolled up and down about that in a month but never in a week. I have AAPL allocated to my conservative account. But it sure is tempting to use that capital for more volatile securities. If it goes over 115 on the rally up to product announcement it will be difficult not to sell and take profits!

You're a trader, not an investor. Investors such as myself look at the long term. I bought my last large position in Apple middle of 2004, when Apple was $16.97 a share before the split in 2005. If I were trading the stock instead of investing, it would have so,d it a number of times, and never made what I have. But I've kept , and bought so e more during the recession. I didn't sell it when it went done below $400.

I'd be willing to say that by not selling, I've made a bigger percentage than you have during the same time. I've got other investments, and while doing well, have not equaled this one. I used to do a lot of trading during the '90's, but not any more, just a bit.
post #59 of 61
Quote:
Originally Posted by melgross View Post


Now, that is nonsense! The reason why Amazon is priced where it is is simple. Bezos has convinced Wall Street that someday soon, Amazon will be making big profits. That's pretty much all it is. Once it's understood that it's impossible, going by their business model, the heyday of Amazon's stock price will be over.

If it moves P/E to 30, then the stock will plummet. At about a P/E of 830 now, and a stock price of about $330, that will leave investors hanging off a cliff. If the stock remained where it is now, while those sales and profits ballooned, then it might work, as the P/E slowly dropped. But the stock could continue going up during this time, whereupon, it would crash.

Going by any normal standard, Amazon should be no more that 30 now. It's a retailer, mostly, with unprofitable hardware lines, and generally, no profit. So the stock could be fairly priced at $15.

 

You obviously did not run the numbers.

 

$30 stock price for Amazon is ridiculous.

post #60 of 61
Quote:
Originally Posted by melgross View Post


You're a trader, not an investor. Investors such as myself look at the long term. I bought my last large position in Apple middle of 2004, when Apple was $16.97 a share before the split in 2005. If I were trading the stock instead of investing, it would have so,d it a number of times, and never made what I have. But I've kept , and bought so e more during the recession. I didn't sell it when it went done below $400.

I'd be willing to say that by not selling, I've made a bigger percentage than you have during the same time. I've got other investments, and while doing well, have not equaled this one. I used to do a lot of trading during the '90's, but not any more, just a bit.

 

You are generalizing.  Buying and holding for decades is not always the most profitable strategy.

 

Look at the people who bought and held Yahoo, AOL, Ford, Sears, RadioShack, ect.  Buy and hold is good if your original thesis for the purchase is still valid.  But market conditions change all the time and you could lose massive profits from holding too long.

post #61 of 61
Quote:
Originally Posted by Paul94544 View Post
 

speaking of returns. I really don't know why I keep long on Apple. I have 300 shares bought on a basis of 68. Now I admit that is a fine profit on paper. But I have been trading : ONNN, PFE, AEO, BRCD, BBRY and have made about $5000 in a few short weeks . I just can't seem to get up the nerve to sell my apple stock. I'm tying up buying power. In one week BRCD went from 8.5 to 9.5. and I made over  $1000. To make 1000 on apple it has to move from 100 to 104. now admittedly it has rolled up and down about that in a month but never in a week. I have AAPL allocated to my conservative account. But it sure is tempting to use that capital for more volatile securities. If it goes over 115 on the rally up to product announcement it will be difficult not to sell and take profits!

 

You need to take into consideration RISK.

 

Sure you made $5000 in a few weeks.  But could you have just as easily LOST $5000 in a few weeks?  Or more?

 

Remember large gains cannot be achive without large risk.

The only exception is when the market is inefficent.  This happens when is a stock is grossly undervalued or over-valued.  This was the case when Apple was at $385-$400. 

 

What is your goal?  Is it to make profits to spend immediately?  Or are you trying to build WEALTH.  If you are trying to build wealth instead you need to take into consideration tax consequences of long term capital gains, dividends, ect.  Are your investments in a tax preferred vechicle like a 401k, IRA, or Roth?  How much of your portfolio are you putting at risk in a single stock?  Do you need that cash within 12 months?  In the long-term it is MUCH better to build WEALTH instead of short-term income. 

 

I've noticed that many traders do it for fun and the thrill.  That is extremely dangerous.  Only about 10% of day-traders break even.  The rest lose everything.  Remember what your goals are and be patient enough to reach them.  A sucessful investor takes a decades view of investing.

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