It's just being argumentative to pretend that margins don't have an effect upon valuations, as margins go directly into the NPV calculations of future cash flows.
If someone has 90% margins but net income of $100m, they aren't going to be valued more highly than Apple with ~20-25% net margins. It comes down to the amount of profit. Apple and Exxon are pretty even when it comes to profitability. Exxon's lower margins don't matter, it's how much the margins change. Both company's margins are staying pretty steady. I certainly don't see that Apple should be valued 30% higher than Exxon when their earnings don't reflect that.
Where are these investors getting scammed? They may be buying at a relatively high price to where the stock was at a little while ago, but they buy Apple shares knowing exactly what Apple's past earnings have been and where the road is going. There's no scam involved.
What "potential gains" are you referring to?
It's at $645 just now, it peaked at $700. If a small investor invested now, say $20k, they'd stand to gain $1705 minus fees etc if it reached the same peak as before. It's hardly a hot growth stock. The scam is overhyping potential gains in order to push investors into buying at a higher price:
"Some investors were getting too emotional, irresponsibly egged on by Wall Street analysts such as Brian White, who had a cutesy $1,111 price target, and Gene Munster, who couldn't stop talking out of his rear with empty Apple TV predictions."
Morgan Stanley was talking about $17.5b in the first year for an iWatch:
They are blatantly lying about Apple's future products and pulling out so many false sales figures to push people into buying the stock. When analysts knowingly lie to potential investors, that's a scam.
"overpriced at the moment relative to their earnings"
YOU were the one making the comparison between price and CURRENT earnings. Duh!
I should have clarified that. I was of course suggesting the P/E was too high and you were saying it was too low and then I said it was an irrelevant metric. Basically, I'm saying that it's not significant if the P/E ratio is seen as too low because right now, Apple is a big company with little potential earnings growth.
The figure is meaningful for a startup company because with high earnings, they can grow their income by growing their business. Apple has dominated the premium industry so there's little room to grow further and this is not a bad thing. They are at the top. People don't have to be disappointed if Apple merely stays number 1 and doesn't significantly grow their earnings.
There's a conflict here between Apple's core values and those of investors. Investors just want more, more, more. Apple doesn't work like that. If they don't think some tacky wrist device is the right thing to do, they won't do it to simply chase after a bit extra profit. That annoys analysts and the like because it's all they know.
All I'm suggesting is that people don't get too carried away with the OMG stock split, the stock is going to $800 ($114 after the split) etc. Be realistic about what the gains are going to be at this point. I could see the iPhone 6 and maybe even the Beats deal impressing some people to push the stock higher than it is now but I don't think that valuation would be accurate for Apple going forward.
It's just being argumentative to pretend that margins don't have an effect upon valuations, as margins go directly into the NPV calculations of future cash flows.
If someone has 90% margins but net income of $100m, they aren't going to be valued more highly than Apple with ~20-25% net margins. It comes down to the amount of profit. Apple and Exxon are pretty even when it comes to profitability. Exxon's lower margins don't matter, it's how much the margins change. Both company's margins are staying pretty steady. I certainly don't see that Apple should be valued 30% higher than Exxon when their earnings don't reflect that.
Where are these investors getting scammed? They may be buying at a relatively high price to where the stock was at a little while ago, but they buy Apple shares knowing exactly what Apple's past earnings have been and where the road is going. There's no scam involved.
What "potential gains" are you referring to?
It's at $645 just now, it peaked at $700. If a small investor invested now, say $20k, they'd stand to gain $1705 minus fees etc if it reached the same peak as before. It's hardly a hot growth stock. The scam is overhyping potential gains in order to push investors into buying at a higher price:
"Some investors were getting too emotional, irresponsibly egged on by Wall Street analysts such as Brian White, who had a cutesy $1,111 price target, and Gene Munster, who couldn't stop talking out of his rear with empty Apple TV predictions."
Morgan Stanley was talking about $17.5b in the first year for an iWatch:
They are blatantly lying about Apple's future products and pulling out so many false sales figures to push people into buying the stock. When analysts knowingly lie to potential investors, that's a scam.
"overpriced at the moment relative to their earnings"
YOU were the one making the comparison between price and CURRENT earnings. Duh!
I should have clarified that. I was of course suggesting the P/E was too high and you were saying it was too low and then I said it was an irrelevant metric. Basically, I'm saying that it's not significant if the P/E ratio is seen as too low because right now, Apple is a big company with little potential earnings growth.
The figure is meaningful for a startup company because with high earnings, they can grow their income by growing their business. Apple has dominated the premium industry so there's little room to grow further and this is not a bad thing. They are at the top. People don't have to be disappointed if Apple merely stays number 1 and doesn't significantly grow their earnings.
There's a conflict here between Apple's core values and those of investors. Investors just want more, more, more. Apple doesn't work like that. If they don't think some tacky wrist device is the right thing to do, they won't do it to simply chase after a bit extra profit. That annoys analysts and the like because it's all they know.
All I'm suggesting is that people don't get too carried away with the OMG stock split, the stock is going to $800 ($114 after the split) etc. Be realistic about what the gains are going to be at this point. I could see the iPhone 6 and maybe even the Beats deal impressing some people to push the stock higher than it is now but I don't think that valuation would be accurate for Apple going forward.
You sure have a pessimistic view of Apple!
You've clearly given this topic a lot of thought, and I think you're wrong. There is no fair value for a stock. Why is Amazon at over 500 P/E? It's been like that for some years. I think it's due to crash, but so have others, and they've been wrong for years, too. Maths will only take you so far. If you look at the chart for Apple shares over the past ten years, it doesn't really bear any close relation to Apple's fortunes on an annual basis.
I feel that Apple is 'just getting started' to quote Tim Cook, and that their shares will perform very well for the foreseeable future. The only thing that would bring them crashing down is a worldwide recession, and even then, I would hold on to the shares now that they are paying a dividend.
All I'm suggesting is that people don't get too carried away with the OMG stock split, the stock is going to $800 ($114 after the split) etc. Be realistic about what the gains are going to be at this point. I could see the iPhone 6 and maybe even the Beats deal impressing some people to push the stock higher than it is now but I don't think that valuation would be accurate for Apple going forward.
Don't you think that on Monday, early, there will be a lot of movement - probably both up and down? This will be due to emotions and excitement, not news or performance.
The people with the pessimistic view of Apple are the ones who think Apple stock needs to rise dramatically forever in order for the company to be considered a success. I consider them a huge success even if their stock goes down to $400. I don't think that's pessimistic. Like I say, not growing forever is not a bad thing.
Don't you think that on Monday, early, there will be a lot of movement - probably both up and down? This will be due to emotions and excitement, not news or performance.
This all happened before. In the run up to $700, people were trying to keep the momentum going and saying really stupid things:
"We’re at $600 now, but I think Apple has much further to go from here. If things play out as I expect, Apple will hit $1,650 by the end of 2015."
This convinced small-time investors to buy in at $700 and we all know what happened. The stock price collapsed and some of these people lost money when they sold at a lower price. Some others who bought in at $700 are desperate to not lose on their investment so they want to see it top $700 again. This is to sell and minimize losses.
People overhype the stock and then when it drops, everybody points their disappointment at Tim Cook who had no part in the price changes.
If someone has 90% margins but net income of $100m, they aren't going to be valued more highly than Apple with ~20-25% net margins. It comes down to the amount of profit. Apple and Exxon are pretty even when it comes to profitability. Exxon's lower margins don't matter, it's how much the margins change. Both company's margins are staying pretty steady. I certainly don't see that Apple should be valued 30% higher than Exxon when their earnings don't reflect that.
Okay, you're starting to repeat yourself. When that happens, let's just assume we disagree and leave it at that, shall we?
The fact is, there is so much going on besides Net income and Gross Margins, that you can't make a conclusion about valuations. We're talking future cash flows, so we want to know about growth. While Apple and Exxon are pretty close when it comes to profits, Apple has been growing its profits dramatically, while Exxon has been mostly steady with the occasional bump in the road due to oil shocks, etc. Apple's valuation is higher even though the two NI are about the same, because the market presumes Apple's future profit growth will be better, even if it has slowed.
You keep saying that Apple's "earnings don't reflect that", which again is looking at the past earnings, but haven't we agreed that valuations are based upon future expectations? Seriously, what's your point, since you can't seem to stay consistent.
"If a small investor invested now, say $20k, they'd stand to gain $1705 minus fees etc if it reached the same peak as before. It's hardly a hot growth stock."
Who is saying Apple is a "hot growth stock"? Is this another straw man argument? I never said anything of the sort. In fact, given Apple's recent actions, it's more likely characterized as a value stock with growth potential. Why does your example presume that $700 is the top?
"The scam is overhyping potential gains in order to push investors into buying at a higher price:"
And again, why is this in response to me? Where did I hype anything? Everyone knows that theStreet is Jim Cramer's scam site. Why listen to anything written there? I've never linked to it, or quoted it.
"Some investors were getting too emotional, irresponsibly egged on by Wall Street analysts such as Brian White, who had a cutesy $1,111 price target, and Gene Munster, who couldn't stop talking out of his rear with empty Apple TV predictions."
And, again, what does this have to do with me and my posts?
Good god man, I'm not going to calculate every fundamental metric for you, just go to Seekingalpha and read any number of posts about Apple. There's lots of fundamental and technical analysis. No need ro reinvent the wheel. Asking me that is starting to indicate you are just trying to irritate.
"I should have clarified that. I was of course suggesting the P/E was too high and you were saying it was too low"
Nonsense. Nowhere in that original comment, did I say it was "too low". I said, "Are you saying that the Price to Earnings is too high? Have you looked at any other companies lately?" Why do you just make up stuff?
"Basically, I'm saying that it's not significant if the P/E ratio is seen as too low because right now, Apple is a big company with little potential earnings growth."
I'm wondering if you understand the financial markets at all. IF, what you say is true that Apple's future earnings growth is slow, then the markets typically dictate that that company has a low PE ratio. It's NOT irrelevant. It's totally explainable, you just didn't do it. Why do utilities get low PE ratios? Because they have slow growth rates.
"Apple has dominated the premium industry so there's little room to grow further and this is not a bad thing."
Yes, but others may disagree and believe that Apple can extend its offerings, like they did with the iPod, from high-end products to the low-end. When Apple had no netbook offering, aka cheap laptop, Apple extended their line to include iPads, essentially lowering the price of entry for a computing product to $500, and with the iPad mini even lower.
"There's a conflict here between Apple's core values and those of investors."
No, you are ascribing motivations to nameless investors. A total straw man argument.
"All I'm suggesting is that people don't get too carried away with the OMG stock split"
And, what does any of that have to do with my posts? If you want to write an opinion piece, do it in your own thread, and don't QUOTE my post, unless you are responding to me. Clearly, you aren't since none of this has anything to do with my original comment.
You keep saying that Apple's "earnings don't reflect that", which again is looking at the past earnings, but haven't we agreed that valuations are based upon future expectations?
You have to base the future assessment on something tangible otherwise you can make anything up and that's what people do all the time. Obviously you can't anticipate revolutionary products like the iPhone but even there, Apple's net income went from $1.9b in 2006 to $3.5b in 2007 then $4.8b in 2008. That's far from the recent $37b; it took a few years to reach this level of income.
Good god man, I'm not going to calculate every fundamental metric for you, just go to Seekingalpha and read any number of posts about Apple. There's lots of fundamental and technical analysis. No need ro reinvent the wheel.
There's no calculation required, you must have some idea already of what Apple's stock price ought to be, otherwise you wouldn't assume it'll go up.
Nowhere in that original comment, did I say it was "too low". I said, "Are you saying that the Price to Earnings is too high? Have you looked at any other companies lately?" Why do you just make up stuff?
Why ask the question if you agree it's not too low?
IF, what you say is true that Apple's future earnings growth is slow, then the markets typically dictate that that company has a low PE ratio. It's NOT irrelevant. It's totally explainable, you just didn't do it. Why do utilities get low PE ratios? Because they have slow growth rates.
So what's the problem with Apple having a low P/E? Also it is irrelevant because as I explained, Amazon's P/E is vastly different from Apple's but their stock price growth over the past few years has been very similar. This means the P/E ratio is not a reliable indicator for what's going to happen with the stock price i.e irrelevant.
You keep saying that Apple's "earnings don't reflect that", which again is looking at the past earnings, but haven't we agreed that valuations are based upon future expectations?
You have to base the future assessment on something tangible otherwise you can make anything up and that's what people do all the time. Obviously you can't anticipate revolutionary products like the iPhone but even there, Apple's net income went from $1.9b in 2006 to $3.5b in 2007 then $4.8b in 2008. That's far from the recent $37b; it took a few years to reach this level of income.
Good god man, I'm not going to calculate every fundamental metric for you, just go to Seekingalpha and read any number of posts about Apple. There's lots of fundamental and technical analysis. No need ro reinvent the wheel.
There's no calculation required, you must have some idea already of what Apple's stock price ought to be, otherwise you wouldn't assume it'll go up.
Nowhere in that original comment, did I say it was "too low". I said, "Are you saying that the Price to Earnings is too high? Have you looked at any other companies lately?" Why do you just make up stuff?
Why ask the question if you agree it's not too low?
IF, what you say is true that Apple's future earnings growth is slow, then the markets typically dictate that that company has a low PE ratio. It's NOT irrelevant. It's totally explainable, you just didn't do it. Why do utilities get low PE ratios? Because they have slow growth rates.
So what's the problem with Apple having a low P/E? Also it is irrelevant because as I explained, Amazon's P/E is vastly different from Apple's but their stock price growth over the past few years has been very similar. This means the P/E ratio is not a reliable indicator for what's going to happen with the stock price i.e irrelevant.
So that's why you think Apple is going down—because you think that the smartphone and tablet markets are becoming saturated. I don't think they are anywhere near to doing so. Just because the iPad market appears to have levelled off in recent months doesn't mean it will long-term. I think that both markets have plenty of room to grow. Apple's SKUs are so limited at the moment compared to the iPod.
So that's why you think Apple is going down—because you think that the smartphone and tablet markets are becoming saturated.
Apple isn't going down, Apple's just fine. Also not going up doesn't mean going down, I think they will remain fairly steady. The stock price, which is not directly linked to Apple's health can go down and there would still be nothing wrong with Apple.
They managed to sell 51m iPhones in Q1 2014 vs 47.8m in Q1 2013 and 26m iPads vs 22.9m but despite small unit volume growth, net profit was the same at $13.1b. If they managed to sell 55m iPhone 6 units, that would still be a great result but earnings might not grow, same as before.
I think that both markets have plenty of room to grow. Apple's SKUs are so limited at the moment compared to the iPod.
They can grow unit volume easily if they drop the price but it lowers margins and net income doesn't grow. People buy products at price points they are comfortable with and not everyone is willing to buy a $650 phone or get tied into the corresponding contract when there are cheaper alternatives. The premium markets will always have a more limited potential unit volume. The iPhone 6 might expand it but 50m units in 3 months is already huge.
I wonder if Apple has thought about using Beats to extend a line of covers and cases for iPhone, iPad and iPod touch? Where Apple can't and won't go in terms of style, Beats could easily experiment.
Oh, and in case Mel Gross hasn't been looking... ... AAPL is up the pre-split equivalent of about $11.34 per share as of this moment. What's more strange is that BBRY (Blackberry) is up more than 3%!
UPDATE: The stock closed today at $93.72. Not a bad first day after the split!
Comments
If someone has 90% margins but net income of $100m, they aren't going to be valued more highly than Apple with ~20-25% net margins. It comes down to the amount of profit. Apple and Exxon are pretty even when it comes to profitability. Exxon's lower margins don't matter, it's how much the margins change. Both company's margins are staying pretty steady. I certainly don't see that Apple should be valued 30% higher than Exxon when their earnings don't reflect that.
It's at $645 just now, it peaked at $700. If a small investor invested now, say $20k, they'd stand to gain $1705 minus fees etc if it reached the same peak as before. It's hardly a hot growth stock. The scam is overhyping potential gains in order to push investors into buying at a higher price:
http://www.thestreet.com/story/12180008/1/apple-to-1000-in-2014.html
"Some investors were getting too emotional, irresponsibly egged on by Wall Street analysts such as Brian White, who had a cutesy $1,111 price target, and Gene Munster, who couldn't stop talking out of his rear with empty Apple TV predictions."
Morgan Stanley was talking about $17.5b in the first year for an iWatch:
http://appleinsider.com/articles/14/02/04/morgan-stanley-sees-iwatch-ringing-up-175b-from-iphone-users-in-first-year
They are blatantly lying about Apple's future products and pulling out so many false sales figures to push people into buying the stock. When analysts knowingly lie to potential investors, that's a scam.
What should it be and why?
I should have clarified that. I was of course suggesting the P/E was too high and you were saying it was too low and then I said it was an irrelevant metric. Basically, I'm saying that it's not significant if the P/E ratio is seen as too low because right now, Apple is a big company with little potential earnings growth.
The figure is meaningful for a startup company because with high earnings, they can grow their income by growing their business. Apple has dominated the premium industry so there's little room to grow further and this is not a bad thing. They are at the top. People don't have to be disappointed if Apple merely stays number 1 and doesn't significantly grow their earnings.
There's a conflict here between Apple's core values and those of investors. Investors just want more, more, more. Apple doesn't work like that. If they don't think some tacky wrist device is the right thing to do, they won't do it to simply chase after a bit extra profit. That annoys analysts and the like because it's all they know.
All I'm suggesting is that people don't get too carried away with the OMG stock split, the stock is going to $800 ($114 after the split) etc. Be realistic about what the gains are going to be at this point. I could see the iPhone 6 and maybe even the Beats deal impressing some people to push the stock higher than it is now but I don't think that valuation would be accurate for Apple going forward.
You sure have a pessimistic view of Apple!
You've clearly given this topic a lot of thought, and I think you're wrong. There is no fair value for a stock. Why is Amazon at over 500 P/E? It's been like that for some years. I think it's due to crash, but so have others, and they've been wrong for years, too. Maths will only take you so far. If you look at the chart for Apple shares over the past ten years, it doesn't really bear any close relation to Apple's fortunes on an annual basis.
I feel that Apple is 'just getting started' to quote Tim Cook, and that their shares will perform very well for the foreseeable future. The only thing that would bring them crashing down is a worldwide recession, and even then, I would hold on to the shares now that they are paying a dividend.
All I'm suggesting is that people don't get too carried away with the OMG stock split, the stock is going to $800 ($114 after the split) etc. Be realistic about what the gains are going to be at this point. I could see the iPhone 6 and maybe even the Beats deal impressing some people to push the stock higher than it is now but I don't think that valuation would be accurate for Apple going forward.
Don't you think that on Monday, early, there will be a lot of movement - probably both up and down? This will be due to emotions and excitement, not news or performance.
The people with the pessimistic view of Apple are the ones who think Apple stock needs to rise dramatically forever in order for the company to be considered a success. I consider them a huge success even if their stock goes down to $400. I don't think that's pessimistic. Like I say, not growing forever is not a bad thing.
This all happened before. In the run up to $700, people were trying to keep the momentum going and saying really stupid things:
http://www.forbes.com/sites/ericjackson/2012/03/21/why-apple-will-hit-1650-by-the-end-of-2015/
"We’re at $600 now, but I think Apple has much further to go from here. If things play out as I expect, Apple will hit $1,650 by the end of 2015."
This convinced small-time investors to buy in at $700 and we all know what happened. The stock price collapsed and some of these people lost money when they sold at a lower price. Some others who bought in at $700 are desperate to not lose on their investment so they want to see it top $700 again. This is to sell and minimize losses.
People overhype the stock and then when it drops, everybody points their disappointment at Tim Cook who had no part in the price changes.
If someone has 90% margins but net income of $100m, they aren't going to be valued more highly than Apple with ~20-25% net margins. It comes down to the amount of profit. Apple and Exxon are pretty even when it comes to profitability. Exxon's lower margins don't matter, it's how much the margins change. Both company's margins are staying pretty steady. I certainly don't see that Apple should be valued 30% higher than Exxon when their earnings don't reflect that.
Okay, you're starting to repeat yourself. When that happens, let's just assume we disagree and leave it at that, shall we?
The fact is, there is so much going on besides Net income and Gross Margins, that you can't make a conclusion about valuations. We're talking future cash flows, so we want to know about growth. While Apple and Exxon are pretty close when it comes to profits, Apple has been growing its profits dramatically, while Exxon has been mostly steady with the occasional bump in the road due to oil shocks, etc. Apple's valuation is higher even though the two NI are about the same, because the market presumes Apple's future profit growth will be better, even if it has slowed.
You keep saying that Apple's "earnings don't reflect that", which again is looking at the past earnings, but haven't we agreed that valuations are based upon future expectations? Seriously, what's your point, since you can't seem to stay consistent.
"If a small investor invested now, say $20k, they'd stand to gain $1705 minus fees etc if it reached the same peak as before. It's hardly a hot growth stock."
Who is saying Apple is a "hot growth stock"? Is this another straw man argument? I never said anything of the sort. In fact, given Apple's recent actions, it's more likely characterized as a value stock with growth potential. Why does your example presume that $700 is the top?
"The scam is overhyping potential gains in order to push investors into buying at a higher price:"
And again, why is this in response to me? Where did I hype anything? Everyone knows that theStreet is Jim Cramer's scam site. Why listen to anything written there? I've never linked to it, or quoted it.
"Some investors were getting too emotional, irresponsibly egged on by Wall Street analysts such as Brian White, who had a cutesy $1,111 price target, and Gene Munster, who couldn't stop talking out of his rear with empty Apple TV predictions."
And, again, what does this have to do with me and my posts?
Good god man, I'm not going to calculate every fundamental metric for you, just go to Seekingalpha and read any number of posts about Apple. There's lots of fundamental and technical analysis. No need ro reinvent the wheel. Asking me that is starting to indicate you are just trying to irritate.
"I should have clarified that. I was of course suggesting the P/E was too high and you were saying it was too low"
Nonsense. Nowhere in that original comment, did I say it was "too low". I said, "Are you saying that the Price to Earnings is too high? Have you looked at any other companies lately?" Why do you just make up stuff?
"Basically, I'm saying that it's not significant if the P/E ratio is seen as too low because right now, Apple is a big company with little potential earnings growth."
I'm wondering if you understand the financial markets at all. IF, what you say is true that Apple's future earnings growth is slow, then the markets typically dictate that that company has a low PE ratio. It's NOT irrelevant. It's totally explainable, you just didn't do it. Why do utilities get low PE ratios? Because they have slow growth rates.
"Apple has dominated the premium industry so there's little room to grow further and this is not a bad thing."
Yes, but others may disagree and believe that Apple can extend its offerings, like they did with the iPod, from high-end products to the low-end. When Apple had no netbook offering, aka cheap laptop, Apple extended their line to include iPads, essentially lowering the price of entry for a computing product to $500, and with the iPad mini even lower.
"There's a conflict here between Apple's core values and those of investors."
No, you are ascribing motivations to nameless investors. A total straw man argument.
"All I'm suggesting is that people don't get too carried away with the OMG stock split"
And, what does any of that have to do with my posts? If you want to write an opinion piece, do it in your own thread, and don't QUOTE my post, unless you are responding to me. Clearly, you aren't since none of this has anything to do with my original comment.
Apple's net income fell last year. The most recent quarters are flat vs last year. The smartphone and tablet markets are saturating.
You have to base the future assessment on something tangible otherwise you can make anything up and that's what people do all the time. Obviously you can't anticipate revolutionary products like the iPhone but even there, Apple's net income went from $1.9b in 2006 to $3.5b in 2007 then $4.8b in 2008. That's far from the recent $37b; it took a few years to reach this level of income.
There's no calculation required, you must have some idea already of what Apple's stock price ought to be, otherwise you wouldn't assume it'll go up.
Why ask the question if you agree it's not too low?
So what's the problem with Apple having a low P/E? Also it is irrelevant because as I explained, Amazon's P/E is vastly different from Apple's but their stock price growth over the past few years has been very similar. This means the P/E ratio is not a reliable indicator for what's going to happen with the stock price i.e irrelevant.
So that's why you think Apple is going down—because you think that the smartphone and tablet markets are becoming saturated. I don't think they are anywhere near to doing so. Just because the iPad market appears to have levelled off in recent months doesn't mean it will long-term. I think that both markets have plenty of room to grow. Apple's SKUs are so limited at the moment compared to the iPod.
Apple isn't going down, Apple's just fine. Also not going up doesn't mean going down, I think they will remain fairly steady. The stock price, which is not directly linked to Apple's health can go down and there would still be nothing wrong with Apple.
They managed to sell 51m iPhones in Q1 2014 vs 47.8m in Q1 2013 and 26m iPads vs 22.9m but despite small unit volume growth, net profit was the same at $13.1b. If they managed to sell 55m iPhone 6 units, that would still be a great result but earnings might not grow, same as before.
They can grow unit volume easily if they drop the price but it lowers margins and net income doesn't grow. People buy products at price points they are comfortable with and not everyone is willing to buy a $650 phone or get tied into the corresponding contract when there are cheaper alternatives. The premium markets will always have a more limited potential unit volume. The iPhone 6 might expand it but 50m units in 3 months is already huge.
Oh, and in case Mel Gross hasn't been looking...
UPDATE: The stock closed today at $93.72. Not a bad first day after the split!