Originally posted by hmurchison
Apple is severely overpriced.
No, it's not.
Companies such as Apple, with rising profits, severe growth curves, no long or short term debt, and a good deal of cash on hand and investments, are almost always valued much higher than traditional manufacturing or retail businesses.
Apple has a high P/E. Some people take that as a sign that the company is over valued. But that would be wrong.
First of all, it isn't some indicator that has an actual meaning. It's simply a number that expresses a level of confidence that the company will, or won't, perform at a certain level in the near future (6 months to a year, or two). There are traditional values for this. Manufacturing has been 10, electronics has been 20, etc. Companies with dividends have lower P/E's than those that perform as well but don't distribute. But these numbers keep changing.
If Apple can continue its rise, then the price will reflect that. If, on the 18th, the profit is at the level expected, the P/E will drop, proving that the value is correct. If the profit is not what is expected, then the stock will drop, bringing the P/E down as well.
It's simply a bet that the performance is where people think it will be.
Remember that Apple has out performed the streets expectations for a while now.
This quarter, from the little we know, was a blowout. Apple predicted $4.7 billion in sales vs. $3.49 billion last year. The highest number the street rationally gave was $5.1 billion. The increase over both ($5.7) was enough to leave them with their mouths hanging open.
Actual sales breakdown was just as impressive. The stores breaking $1 billion this quarter for the first time, an amazing feat! This puts Apple in with a highly unusual group, a successful specialty retailer that's also profitable. Something few thought Apple could accomplish when they first started out.
14 million iPods! The highest estimates, and thought to be far out of the mainstream were for 12.5 million. The highest estimates that were considered to be realistic were for 11.5, and even that was considered to be unlikely because of the reported shortages. It was thought that Apple would make 10 million, maybe a bit more, if 5G sales were particularly good. Then the shortage of the 1GB Shuffle dropped that estimate down further.
Evidence that sales were pushed to the higher end (and more profitable) seems to be good.
Apple also had high software sales, if the people I've spoken to are correct (they usually are).
But the sales of the Mac was most welcome. Apple sold about 1,250 million of them this quarter. More than ever before. While the growth from the previous excellent quarter wasn't extreme, it still showed upside. Considering that people were still expecting a drop, this was very good news indeed.
If we can expect sales of the new iMac and MacBook Pro to exceed that of the older units, especially for the MBP, sales should do well this quarter too. We will have to see if Apple comes out with other new units this quarter before we know the impact overall. The only difficult spot I see is that now people might hold off on the purchase of other older models because of the shortened timeframe.
I had mentioned earlier in late December that as 10.4.3 had G4/Altivec support, Apple could have snookered us into thinking that the switch would take place over two years because of the limitations of Rosetta, but that he must have known that they would be bringing G4 support to it all along, even though he gave NO hint at all that it would.
Well, it does seem to be true.