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I rue the day that I decided to buy Apple stock.
Don't blame Jobs or the company's management for the stock price. The stock has fallen 50% from its high point over the last year, but this was only because of completely absurd expectations from the street. Right now Apple's PE ratio would still make it markedly overpriced (It is 20, average is 14). When the stock was at 180, think of how much farther out of line PE ratio was. This is what was behind the sharp correction the stock has seen, which had very little to do with the fundamentals of the company or its future outlook. When I say the stock's PE still qualifies as overvalued, Apple is an extraordinary company which lots of "intangible" strengths that 99% of other companies don't have, so it will naturally trade at a premium. I didn't own apple stock before and don't control my own investments, but when it went under 95 I bought a very large amount.
Right now Apple has high quality earnings and revenue, a growing marketshare, and a large amount of cash on hand. The large amount of cash on hand will become a huge big advantage for apple as credit gets harder to obtain. Right now the world's central banks are stepping in and intervening massively, but sooner or later they will have to raise interest rates, and combines like apple with cash and good credit will have a big advantage relative to the competition. I think that over the next 5 years a large number PC makers are going to start going out of business or merge, as the recession cuts the least profitable companies. I'm guessing that a small number of very strong companies will survive, with Apple being dominant over high end consumers (apart from high end gamers). Someone else will develop to fill the netbook or budget market. Realistically, Apple is not well suited for this market, the thing that it offers consumers has never been something which can get a pretty good job done for less, it has been to offer the very best all in one package, which they keep stylishly updated with features that the ordinary person loves. You aren't going to find that in the sub 1k market.
Two things stood out from the keynote to me, first the graph showing their marketshare before and after switching to intel, and their 17% market unit share but 30% industry revenue share. What this says is that apple has extremely high profit margins, it sells a fewer number of computers but they can and do charge more than the competition, which relies on bulk. Because their products are so well designed and supported, people tend to keep them for a long time before buying a replacement, making it harder for Apple to match its competitors in sale, which is one of the reasons behind its historically trailing marketshare. This is good because over the next 10 years, the mbp line has a very small number of competitors. It is much easier to go out of business when you have low profit margins (if you sell cheap computers in bulk, a slight change can leave you treading water or losing money) and an inferior product (
The presentation is exactly right when it points to the inclusion of windows capability as helping lure consumers, and pointing to strength among students. College kids who have macs are going to stay apple consumers for a long time. I am a huge bear on the US market and a believe the recession we are about to go through is going to be bigger, more severe, and affect Americans in more painful ways than the public believes, but Apple is in beautiful shape right now. I am sorry buying Apple stock did not work out for you, but that is out of the company's control. The market overvalued apple precisely because it bought into the advantages and intangibles I wrote about, it just got carried away and set unrealistic growth expectations. It takes a lot of time to develop new iphones, mbps, operating systems, and get them right. So there is a long delay in releasing new products and increases in growth, and I think the market had not been accounting for this enough. I don't know if this is true but I would not be surprised at all if one of the downward forces was a sell off by funds who owned apple but had to sell because of redemption calls from their clients, which have happened at an unprecedented rate over the last 6 months. If a hedge fund has to sell an asset to return money to an investor, Apple would have been an excellent candidate because of its high PE.
I have to actively look for reflections - they are there, just, but you simply don't notice them.
