The problem is that those investors are likely the ones that increase the volatility. Remember the posters grousing this summer about huge drops after a series of unsubstantiated rumors?
Customers don't have to be share holders, and share holders don't have to be customers. There are some good up sides if Apple's loyal customers are loyal stock holders too, but the unhappy ones probably aren't going to be either for very long.
I think we essentially agree on the same things. I'll just reiterate that public perception and unhappy customers can also contribute to a volatile stock and are affected by small and large investors... despite attempts to hide the fact that stock prices are as impacted by emotional panic, hubris, etc.... as they are affected by reams of "scientific data" meant to support their decisions to buy and sell.
Right now a small number Daytraders can manipulate the stock every day with big trades.
If aapl split and we add say maybe 200K more new investors in aapl, more share will be owned by more people. Not everyone who buys dumps their shares at the smallest hiccup.
Look at MS or INTC. Their stock fluctuates very little because there are so many shares outstanding.
Issuing new stock dilutes the value per share. There's less logic in this than in splitting the stock!
Actually, there is a reason for issuing more shares.
When a companies shares are traded, even if they are going up, the company receives no money from those trades, or the value of the stock, except for what they are holding for compensation of employees, etc.
If the company needs cash for expansion, issuance of new stock, perhaps of a different class, so that other stock is not diluted, or diluted too much, is one way to do it. This way, they don't have to borrow money.
They can also issue bonds, but those have to be paid back with interest.
Right now a small number Daytraders can manipulate the stock every day with big trades.
If aapl split and we add say maybe 200K more new investors in aapl, more share will be owned by more people. Not everyone who buys dumps their shares at the smallest hiccup.
Look at MS or INTC. Their stock fluctuates very little because there are so many shares outstanding.
Over 70% of Apple's stock is owned by institutions. Splitting will not change that ratio. Everyone who owns stock will simply own twice as much.
There's no evidence that cheaper stocks attract investors who are less likely to sell. I believe it's the opposite.
Check Intel's price over the past two years. MS's stock doesn't fluctuate too much, but MS hasn't shown rapid growth in years. The stock reflects investors concerns about that, as well as its money losing businesses. If MS dropped the entertainment division, the stock would shoot up.
Actually, there is a reason for issuing more shares.
When a companies shares are traded, even if they are going up, the company receives no money from those trades, or the value of the stock, except for what they are holding for compensation of employees, etc.
If the company needs cash for expansion, issuance of new stock, perhaps of a different class, so that other stock is not diluted, or diluted too much, is one way to do it. This way, they don't have to borrow money.
They can also issue bonds, but those have to be paid back with interest.
You do understand that any money gained from a shelf offering (selling more shares to the public) is taken from current shareholders, right? No company can invent another 10% of itself to sell - if you sell 10% more shares, the other 90% own 10% less of the company than they did before. Interest free? Not hardly.
You do understand that any money gained from a shelf offering (selling more shares to the public) is taken from current shareholders, right? No company can invent another 10% of itself to sell - if you sell 10% more shares, the other 90% own 10% less of the company than they did before. Interest free? Not hardly.
HELLO? but the company holds (owns) 10% more cash. Hence the value of the company also has increased by 10%.
HELLO? but the company holds (owns) 10% more cash. Hence the value of the company also has increased by 10%.
Yes, and once Apple starts sending out dividend checks to shareholders, that cash pile will matter. Until then, any smart investor would be asking Apple why, with 10 billion in cash, they think they need that much more. It amounts to Apple selling 10% of my holdings for cash that goes into THEIR bank account.
Of course since Apple won't be filing for a shelf any time soon, this is all a pointless discussion. But a growth company's stock does not go up because of cash on hand, it goes up because of earnings per share growth. Diluting EPS by selling off part of MY holdings to someone else is not OK with me.
Yes, and once Apple starts sending out dividend checks to shareholders, that cash pile will matter. Until then, any smart investor would be asking Apple why, with 10 billion in cash, they think they need that much more. It amounts to Apple selling 10% of my holdings for cash that goes into THEIR bank account.
Of course since Apple won't be filing for a shelf any time soon, this is all a pointless discussion. But a growth company's stock does not go up because of cash on hand, it goes up because of earnings per share growth. Diluting EPS by selling off part of MY holdings to someone else is not OK with me.
cameron,
a little off subject but I want to congratulate you on the fact that aapl hit 160 this month. You called it back in July and it happened a month early. Great call.
You do understand that any money gained from a shelf offering (selling more shares to the public) is taken from current shareholders, right? No company can invent another 10% of itself to sell - if you sell 10% more shares, the other 90% own 10% less of the company than they did before. Interest free? Not hardly.
I'm talking about the advantage to the company. Beside a different class of shares, as I mentioned, can have a very different value, due to voting restrictions, etc. The dilution isn't the same.
But, it does raise money, which can uplift the value of the company if it is put to good use, such as building a new factory to increase production of popular items, R&D, purchase of another companies technology, payment of long, and possibly short term debt, etc.
This will increase shareholder value over the medium term, which a split can't do.
Yes, and once Apple starts sending out dividend checks to shareholders, that cash pile will matter. Until then, any smart investor would be asking Apple why, with 10 billion in cash, they think they need that much more. It amounts to Apple selling 10% of my holdings for cash that goes into THEIR bank account.
Of course since Apple won't be filing for a shelf any time soon, this is all a pointless discussion. But a growth company's stock does not go up because of cash on hand, it goes up because of earnings per share growth. Diluting EPS by selling off part of MY holdings to someone else is not OK with me.
I'm not advising Apple to do this. They don't have to. It was a general statement in response to another general statement.
Using today's multiple of 47 with the $7.00 EPS scenario, AAPL would be at $329.
Isn't it likely that as AAPL's market capitalization goes up, and let's say it approaches and even eclipses Microsoft's, that the P/E has to come down? I believe the high P/E is an expression of investors' expectations of growth, but as Apple becomes bigger and bigger, the same growth rate, especially in terms of percentages, becomes harder and harder to achieve. Don't we expect dividends and a lower P/E at some point?
Isn't it likely that as AAPL's market capitalization goes up, and let's say it approaches and even eclipses Microsoft's, that the P/E has to come down? I believe the high P/E is an expression of investors' expectations of growth, but as Apple becomes bigger and bigger, the same growth rate, especially in terms of percentages, becomes harder and harder to achieve. Don't we expect dividends and a lower P/E at some point?
Any thoughts?
Exactly!
The larger a company becomes, the more difficult it is to maintain the same level of growth. That's one reason why large companies often go on an acquisition binge. It's the only, and often, cheapest, and safest, way, the company can continue to grow.
We can look at MS itself. Without moving into other, faster growth areas, MS can only grow at the pace of the industry, except for a few more years in server software, where MS has caught up with the open solutions, and whose growth has yet to reach its monopoly limits.
So, if MS remains just an OS/Office company, their growth will be no more than 8 to 10% yearly, under optimum conditions (assuming that OS X and Linux isn't eating into their marketshare by much). If the industry slows down further, so will their growth. That's why the stock price declined, and has been stuck at, or below, $30 for so many years.
Therefore, the attempt at cell OS licensing, entertainment, hardware, investments in communication companies, etc.
I'm not saying that in their case all of this is working out the way they want, but they do understand that they have to do something.
In Apple's case, I wonder why they have been so tightfisted with their cash. At the end of this quarter, they should have about $14 billion.
Are they holding this for one big acquisition? I wonder.
I've felt for years that Microsoft's best option would be to split up the company into divisions with a tighter focus on profitability in each division. As you've noted, their growth has been disappointingly flat for years. Ballmer should be fired, and Xbox should be a separate company.
I've felt for years that Microsoft's best option would be to split up the company into divisions with a tighter focus on profitability in each division. As you've noted, their growth has been disappointingly flat for years. Ballmer should be fired, and Xbox should be a separate company.
Often, a company has more value in the individual parts, and as you say, when broken up would be worth more.
But, the XBox would disappear without MS's deep pockets. It's a failure as a business.
Isn't it likely that as AAPL's market capitalization goes up, and let's say it approaches and even eclipses Microsoft's, that the P/E has to come down? I believe the high P/E is an expression of investors' expectations of growth, but as Apple becomes bigger and bigger, the same growth rate, especially in terms of percentages, becomes harder and harder to achieve. Don't we expect dividends and a lower P/E at some point?
Any thoughts?
The most insightful post in an otherwise, occasionally bewildering discssion thread on corporate finance!
Apple's current P/E -- which is unsustainably high -- presages the cash flow (and its proxy, earnings) growth that the company has to deliver in the next couple of years. So, in that sense, your observation is spot on, it's P/E will have to inevitably come down given the assets-in-place. Of course, Apple could keep it going if it came up with some next new big thing that none of us as investors foresees yet!
The most insightful post in an otherwise, occasionally bewildering discssion thread on corporate finance!
Apple's current P/E -- which is unsustainably high -- presages the cash flow (and its proxy, earnings) growth that the company has to deliver in the next couple of years. So, in that sense, your observation is spot on, it's P/E will have to inevitably come down given the assets-in-place. Of course, Apple could keep it going if it came up with some next new big thing that none of us as investors foresees yet!
Comments
I totally missed that split.
The problem is that those investors are likely the ones that increase the volatility. Remember the posters grousing this summer about huge drops after a series of unsubstantiated rumors?
Customers don't have to be share holders, and share holders don't have to be customers. There are some good up sides if Apple's loyal customers are loyal stock holders too, but the unhappy ones probably aren't going to be either for very long.
I think we essentially agree on the same things. I'll just reiterate that public perception and unhappy customers can also contribute to a volatile stock and are affected by small and large investors... despite attempts to hide the fact that stock prices are as impacted by emotional panic, hubris, etc.... as they are affected by reams of "scientific data" meant to support their decisions to buy and sell.
Right now a small number Daytraders can manipulate the stock every day with big trades.
If aapl split and we add say maybe 200K more new investors in aapl, more share will be owned by more people. Not everyone who buys dumps their shares at the smallest hiccup.
Look at MS or INTC. Their stock fluctuates very little because there are so many shares outstanding.
Issuing new stock dilutes the value per share. There's less logic in this than in splitting the stock!
Actually, there is a reason for issuing more shares.
When a companies shares are traded, even if they are going up, the company receives no money from those trades, or the value of the stock, except for what they are holding for compensation of employees, etc.
If the company needs cash for expansion, issuance of new stock, perhaps of a different class, so that other stock is not diluted, or diluted too much, is one way to do it. This way, they don't have to borrow money.
They can also issue bonds, but those have to be paid back with interest.
Another point has been raised... does anyone here actually OWN any GOOG? I don't.
I did, for about 18 months, starting a month after they went public.
I think a split would decrease volatility.
Right now a small number Daytraders can manipulate the stock every day with big trades.
If aapl split and we add say maybe 200K more new investors in aapl, more share will be owned by more people. Not everyone who buys dumps their shares at the smallest hiccup.
Look at MS or INTC. Their stock fluctuates very little because there are so many shares outstanding.
Over 70% of Apple's stock is owned by institutions. Splitting will not change that ratio. Everyone who owns stock will simply own twice as much.
There's no evidence that cheaper stocks attract investors who are less likely to sell. I believe it's the opposite.
Check Intel's price over the past two years. MS's stock doesn't fluctuate too much, but MS hasn't shown rapid growth in years. The stock reflects investors concerns about that, as well as its money losing businesses. If MS dropped the entertainment division, the stock would shoot up.
Actually, there is a reason for issuing more shares.
When a companies shares are traded, even if they are going up, the company receives no money from those trades, or the value of the stock, except for what they are holding for compensation of employees, etc.
If the company needs cash for expansion, issuance of new stock, perhaps of a different class, so that other stock is not diluted, or diluted too much, is one way to do it. This way, they don't have to borrow money.
They can also issue bonds, but those have to be paid back with interest.
You do understand that any money gained from a shelf offering (selling more shares to the public) is taken from current shareholders, right? No company can invent another 10% of itself to sell - if you sell 10% more shares, the other 90% own 10% less of the company than they did before. Interest free? Not hardly.
You do understand that any money gained from a shelf offering (selling more shares to the public) is taken from current shareholders, right? No company can invent another 10% of itself to sell - if you sell 10% more shares, the other 90% own 10% less of the company than they did before. Interest free? Not hardly.
HELLO? but the company holds (owns) 10% more cash. Hence the value of the company also has increased by 10%.
HELLO? but the company holds (owns) 10% more cash. Hence the value of the company also has increased by 10%.
Yes, and once Apple starts sending out dividend checks to shareholders, that cash pile will matter. Until then, any smart investor would be asking Apple why, with 10 billion in cash, they think they need that much more. It amounts to Apple selling 10% of my holdings for cash that goes into THEIR bank account.
Of course since Apple won't be filing for a shelf any time soon, this is all a pointless discussion. But a growth company's stock does not go up because of cash on hand, it goes up because of earnings per share growth. Diluting EPS by selling off part of MY holdings to someone else is not OK with me.
I did, for about 18 months, starting a month after they went public.
And what was your reason for selling?
Yes, and once Apple starts sending out dividend checks to shareholders, that cash pile will matter. Until then, any smart investor would be asking Apple why, with 10 billion in cash, they think they need that much more. It amounts to Apple selling 10% of my holdings for cash that goes into THEIR bank account.
Of course since Apple won't be filing for a shelf any time soon, this is all a pointless discussion. But a growth company's stock does not go up because of cash on hand, it goes up because of earnings per share growth. Diluting EPS by selling off part of MY holdings to someone else is not OK with me.
cameron,
a little off subject but I want to congratulate you on the fact that aapl hit 160 this month. You called it back in July and it happened a month early. Great call.
Where do you see aapl in the next three months?
You do understand that any money gained from a shelf offering (selling more shares to the public) is taken from current shareholders, right? No company can invent another 10% of itself to sell - if you sell 10% more shares, the other 90% own 10% less of the company than they did before. Interest free? Not hardly.
I'm talking about the advantage to the company. Beside a different class of shares, as I mentioned, can have a very different value, due to voting restrictions, etc. The dilution isn't the same.
But, it does raise money, which can uplift the value of the company if it is put to good use, such as building a new factory to increase production of popular items, R&D, purchase of another companies technology, payment of long, and possibly short term debt, etc.
This will increase shareholder value over the medium term, which a split can't do.
Yes, and once Apple starts sending out dividend checks to shareholders, that cash pile will matter. Until then, any smart investor would be asking Apple why, with 10 billion in cash, they think they need that much more. It amounts to Apple selling 10% of my holdings for cash that goes into THEIR bank account.
Of course since Apple won't be filing for a shelf any time soon, this is all a pointless discussion. But a growth company's stock does not go up because of cash on hand, it goes up because of earnings per share growth. Diluting EPS by selling off part of MY holdings to someone else is not OK with me.
I'm not advising Apple to do this. They don't have to. It was a general statement in response to another general statement.
And what was your reason for selling?
It went up a good amount, and Apple's stock was rising again. I thought that Apple's stock would rise faster than Google's did.
It did.
Using today's multiple of 47 with the $7.00 EPS scenario, AAPL would be at $329.
Isn't it likely that as AAPL's market capitalization goes up, and let's say it approaches and even eclipses Microsoft's, that the P/E has to come down? I believe the high P/E is an expression of investors' expectations of growth, but as Apple becomes bigger and bigger, the same growth rate, especially in terms of percentages, becomes harder and harder to achieve. Don't we expect dividends and a lower P/E at some point?
Any thoughts?
Isn't it likely that as AAPL's market capitalization goes up, and let's say it approaches and even eclipses Microsoft's, that the P/E has to come down? I believe the high P/E is an expression of investors' expectations of growth, but as Apple becomes bigger and bigger, the same growth rate, especially in terms of percentages, becomes harder and harder to achieve. Don't we expect dividends and a lower P/E at some point?
Any thoughts?
Exactly!
The larger a company becomes, the more difficult it is to maintain the same level of growth. That's one reason why large companies often go on an acquisition binge. It's the only, and often, cheapest, and safest, way, the company can continue to grow.
We can look at MS itself. Without moving into other, faster growth areas, MS can only grow at the pace of the industry, except for a few more years in server software, where MS has caught up with the open solutions, and whose growth has yet to reach its monopoly limits.
So, if MS remains just an OS/Office company, their growth will be no more than 8 to 10% yearly, under optimum conditions (assuming that OS X and Linux isn't eating into their marketshare by much). If the industry slows down further, so will their growth. That's why the stock price declined, and has been stuck at, or below, $30 for so many years.
Therefore, the attempt at cell OS licensing, entertainment, hardware, investments in communication companies, etc.
I'm not saying that in their case all of this is working out the way they want, but they do understand that they have to do something.
In Apple's case, I wonder why they have been so tightfisted with their cash. At the end of this quarter, they should have about $14 billion.
Are they holding this for one big acquisition? I wonder.
I've felt for years that Microsoft's best option would be to split up the company into divisions with a tighter focus on profitability in each division. As you've noted, their growth has been disappointingly flat for years. Ballmer should be fired, and Xbox should be a separate company.
Often, a company has more value in the individual parts, and as you say, when broken up would be worth more.
But, the XBox would disappear without MS's deep pockets. It's a failure as a business.
Isn't it likely that as AAPL's market capitalization goes up, and let's say it approaches and even eclipses Microsoft's, that the P/E has to come down? I believe the high P/E is an expression of investors' expectations of growth, but as Apple becomes bigger and bigger, the same growth rate, especially in terms of percentages, becomes harder and harder to achieve. Don't we expect dividends and a lower P/E at some point?
Any thoughts?
The most insightful post in an otherwise, occasionally bewildering discssion thread on corporate finance!
Apple's current P/E -- which is unsustainably high -- presages the cash flow (and its proxy, earnings) growth that the company has to deliver in the next couple of years. So, in that sense, your observation is spot on, it's P/E will have to inevitably come down given the assets-in-place. Of course, Apple could keep it going if it came up with some next new big thing that none of us as investors foresees yet!
The most insightful post in an otherwise, occasionally bewildering discssion thread on corporate finance!
Apple's current P/E -- which is unsustainably high -- presages the cash flow (and its proxy, earnings) growth that the company has to deliver in the next couple of years. So, in that sense, your observation is spot on, it's P/E will have to inevitably come down given the assets-in-place. Of course, Apple could keep it going if it came up with some next new big thing that none of us as investors foresees yet!
And, look at Goggle's P/E.