I agree that software companies (Google, Facebook) generally get a higher PE than hardware companies (Dell, HP).
Yet, Nadella's taken Microsoft towards hardware and the company's PE has risen (35x current, 17x forward). It can't just be the cloud (which is still small) since Apple also has the cloud.
I think that it's far too easy for us to be impatient. I think the market is wrong about Microsoft and wrong about Apple. Investors who hold on to Microsoft will suffer and those who hold on to Apple will thrive. Microsoft is currently enjoying unrealistically inflated expectations which will be clear in due time. But the time scale I'm looking at is long. One year is a short period of time.
I feel like I've had an epiphany and finally understand why AAPL share price is so undervalued and so easy to manipulate.
The biggest problem with AAPL stock price and it's low PE multiple is not Tim Cook's failure to defend the company. It's not because Apple is perceived as a hardware company and not a software company. Unfortunately, it's because of Apples (necessary) policy of secrecy.
The other companies that we point to with higher PE ratios have defined and well understood products or services and pipelines that make it easier for investors and analysts to estimate/calculate future growth.
The root of the problem stems from the fact that Apples product is not hardware or software - it's innovation and because Apple is so secretive about its future features and products, investors are constantly worried that the well of innovation has dried up or will dry up. When investors don't know what's coming next (if anything!), it's easy for analysts to create and spread FUD (fear, uncertainty and doubt) that scares investors from giving Apple the PE it deserves. Stock prices are all about the future, not the present. When investors don't have a clear vision of the future, share prices suffer. The only solution I see would be for Apple to become less secretive and share more information about their pipeline with the investment community. Unfortunately, this goes against the way Apple operates. Cooks public statements about "doubling down" on secrecy (even though they're a few years old now) reinforce that their secretive nature is not likely to change. Further; we all know that a degree of secrecy is necessary in order to maintain a competitive advantage and prevent competitors from stealing Apple innovations and rushing them to market in a half-baked state. Sadly, this creates a catch-22 for Apple and the AAPL stock price.
The bottom line is that AAPL and Cook need to find a way to show investors that Apples innovation pipeline is healthy and full without giving away the competitive edge that they receive by being secretive about future products and features. If they can do this, the sky is the limit for the AAPL share price and PE levels will quickly rise to where some of us know they should have been all along!
When Steve Jobs was alive, Apple was just as secretive, if not more secretive. The real problem is that Wall Street and the media don't see Tim Cook as a visionary. He doesn't have a product pedigree. He's an ops guy. He's also an MBA. It's too easy to pigeonhole Tim Cook as the "bean-counter CEO" who takes over after the visionary founder and kills off the company's innovation.
Once someone picks up a reputation, it stays with them. It is hard to get rid of that reputation. Tim Cook will probably never be a visionary of Elon Musk's or Steve Jobs' caliber. I don't think he has that in him. Also, he's a very private person. He's not the flamboyant personality that Steve Jobs was. Steve Jobs was the in-your-face type of person. If he was upset, he would let it be known. Tim Cook doesn't seem to be that type of person. He's much more surgical. Also, he's a very private person.
Tim Cook may not be a once-in-history innovator like Elon Musk or Steve Jobs but at the same time, he's no bean-counter.
I feel like I've had an epiphany and finally understand why AAPL share price is so undervalued and so easy to manipulate.
The biggest problem with AAPL stock price and it's low PE multiple is not Tim Cook's failure to defend the company. It's not because Apple is perceived as a hardware company and not a software company. Unfortunately, it's because of Apples (necessary) policy of secrecy.
The other companies that we point to with higher PE ratios have defined and well understood products or services and pipelines that make it easier for investors and analysts to estimate/calculate future growth.
The root of the problem stems from the fact that Apples product is not hardware or software - it's innovation and because Apple is so secretive about its future features and products, investors are constantly worried that the well of innovation has dried up or will dry up. When investors don't know what's coming next (if anything!), it's easy for analysts to create and spread FUD (fear, uncertainty and doubt) that scares investors from giving Apple the PE it deserves. Stock prices are all about the future, not the present. When investors don't have a clear vision of the future, share prices suffer. The only solution I see would be for Apple to become less secretive and share more information about their pipeline with the investment community. Unfortunately, this goes against the way Apple operates. Cooks public statements about "doubling down" on secrecy (even though they're a few years old now) reinforce that their secretive nature is not likely to change. Further; we all know that a degree of secrecy is necessary in order to maintain a competitive advantage and prevent competitors from stealing Apple innovations and rushing them to market in a half-baked state. Sadly, this creates a catch-22 for Apple and the AAPL stock price.
The bottom line is that AAPL and Cook need to find a way to show investors that Apples innovation pipeline is healthy and full without giving away the competitive edge that they receive by being secretive about future products and features. If they can do this, the sky is the limit for the AAPL share price and PE levels will quickly rise to where some of us know they should have been all along!
When Steve Jobs was alive, Apple was just as secretive, if not more secretive. The real problem is that Wall Street and the media don't see Tim Cook as a visionary. He doesn't have a product pedigree. He's an ops guy. He's also an MBA. It's too easy to pigeonhole Tim Cook as the "bean-counter CEO" who takes over after the visionary founder and kills off the company's innovation.
Once someone picks up a reputation, it stays with them. It is hard to get rid of that reputation. Tim Cook will probably never be a visionary of Elon Musk's or Steve Jobs' caliber. I don't think he has that in him. Also, he's a very private person. He's not the flamboyant personality that Steve Jobs was. Steve Jobs was the in-your-face type of person. If he was upset, he would let it be known. Tim Cook doesn't seem to be that type of person. He's much more surgical. Also, he's a very private person.
Tim Cook may not be a once-in-history innovator like Elon Musk or Steve Jobs but at the same time, he's no bean-counter.
This. I think Apple's biggest problem is controlling the narrative and providing a compelling story. Take the iPad Pro. I own the device and along with the Apple Pencil I think it's one of the best devices Apple has ever released. Yet I see next to no advertising for it (the one commercial Apple did was pretty lame) and the messaging has been kind of muddied. Cook says iPP is Apple's vision for the future of computing yet at the event it was Microsoft and Adobe on stage showing off software for it. Why wasn't someone from Apple on stage showing off Apple software re-imagined for iPP? Where is Xcode or Logic for iPP? Why was Apple showing off Office and not iWork? How about an Apple specific app that really takes advantage of the Pencil? Notes is good but it's still pretty basic. Apple had the 'Shot on iPhone 6' campaign. Where is the 'Drawn on iPP' campaign? The Apple Pencil is phenomenal and I've seen some amazing artwork using it. Apple should be highlighting that. Why aren't they? I really hope this new ad guy they hired comes in and completely shakes up Apple's advertising.
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Once someone picks up a reputation, it stays with them. It is hard to get rid of that reputation. Tim Cook will probably never be a visionary of Elon Musk's or Steve Jobs' caliber. I don't think he has that in him. Also, he's a very private person. He's not the flamboyant personality that Steve Jobs was. Steve Jobs was the in-your-face type of person. If he was upset, he would let it be known. Tim Cook doesn't seem to be that type of person. He's much more surgical. Also, he's a very private person.
Tim Cook may not be a once-in-history innovator like Elon Musk or Steve Jobs but at the same time, he's no bean-counter.