Investors who risk their own money pay special attention to the trailing Price/Earnings multiple.
According to that metric, Apple's valuation is higher than Microsoft, Cisco, IBM, Intel and Hewlet-Packard. Unless you are dreaming, I cannot see why Apple stock should be more expensive than stock from well established, widely held companies such as Microsoft, Cisco, IBM, Intel and Hewlet-Packard.
Given that Apple's products are limited to the consumer market (sorry, no competitively priced office computer), and overpriced by $300 to $500, I cannot see how Apple could climb out of its self imposed 5% market share.
And the current world recession suggests that Appple stock is already overvalued because Apple will not be able to maintain its historic or projected market growth in a recession market place where consumers are drawn away from overpriced, uncompetitive consumer products.
I see further declines to come for Apple's stock, given the recession market and Steve Jobs' unwillingless to lower prices.
Trailing P/E is a stupid metric as others have stated, especially if you believe we are headed into a deep recession. As for the comparison companies, take a look at their growth rates and you will quickly understand why they earn a lower trailing P/E.
The one great thing about the consumer market is that when you are only buying one computer, paying 10% more isn't going to derail you if there is some soft value you percieve in the offering. The enterprise doesn't have that luxury, as they purchase enough computers that the 10% quickly becomes a significant line-item premium. While Apple could excel in that arena (especially given the move away from monoculture in many enterprises), it remains to be seen if a compelling business offering would cannibalize consumer sales revenue.
As for the recession, others have pointed out that Apple will be one of the leaders in the recovery whenever it occurs. Lowering prices is great and all, but will it sell enough additional products to actually improve profits? Apple has been extremely successful in the past in offering a low-end teaser model, and giving customers a compelling reason to go above the base model. I agree that they are missing that low-end model, but after all the bitching about "no firewire, no sale," I'm not sure what they could do for a door-buster other than a real update to the mini.
This article is comparing different kinds of companies... like Apples, Wheat, Corn, and sugar. Apple biz is product cycle driven, very dependent on new innovations, as well as the creative leadership of its unique CEO.
RIMM is the closest biz model to Apple, but smaller with a narrower product line. RIMM has faster growth rate but riskier one trick pony. Multiple carrier value chain for RIMM. So a comparison makes sense.
Amazon sells to the consumer, but it has multiple products. What gives it the edge is its web design, back end, and supply chain. Very scalable worldwide... but low margins.
Google is a totally different biz. Totally based on the internet. Extremely scalable and competing worldwide. Good depth of development. Low incremental costs, and obscene gross margins.
They are a function of the market as well. They are priced for a regular recession... but not a Great Depression. So looking at the past is like sitting on the horse backwards and looking at the horse' tail and the scenery going back.
For those of you who have not been around, this is a very disruptive economic turmoil. Not to be taken lightly... but got to keep an open mind for bargains.
Please re-read YOUR post in 6 months and see how wrong you are. There is no expansion in foreign markets. Not at all to the scale it could be. Sales will not increase in foreign markets.
Comments
Investors who risk their own money pay special attention to the trailing Price/Earnings multiple.
According to that metric, Apple's valuation is higher than Microsoft, Cisco, IBM, Intel and Hewlet-Packard. Unless you are dreaming, I cannot see why Apple stock should be more expensive than stock from well established, widely held companies such as Microsoft, Cisco, IBM, Intel and Hewlet-Packard.
Given that Apple's products are limited to the consumer market (sorry, no competitively priced office computer), and overpriced by $300 to $500, I cannot see how Apple could climb out of its self imposed 5% market share.
And the current world recession suggests that Appple stock is already overvalued because Apple will not be able to maintain its historic or projected market growth in a recession market place where consumers are drawn away from overpriced, uncompetitive consumer products.
I see further declines to come for Apple's stock, given the recession market and Steve Jobs' unwillingless to lower prices.
Trailing P/E is a stupid metric as others have stated, especially if you believe we are headed into a deep recession. As for the comparison companies, take a look at their growth rates and you will quickly understand why they earn a lower trailing P/E.
The one great thing about the consumer market is that when you are only buying one computer, paying 10% more isn't going to derail you if there is some soft value you percieve in the offering. The enterprise doesn't have that luxury, as they purchase enough computers that the 10% quickly becomes a significant line-item premium. While Apple could excel in that arena (especially given the move away from monoculture in many enterprises), it remains to be seen if a compelling business offering would cannibalize consumer sales revenue.
As for the recession, others have pointed out that Apple will be one of the leaders in the recovery whenever it occurs. Lowering prices is great and all, but will it sell enough additional products to actually improve profits? Apple has been extremely successful in the past in offering a low-end teaser model, and giving customers a compelling reason to go above the base model. I agree that they are missing that low-end model, but after all the bitching about "no firewire, no sale," I'm not sure what they could do for a door-buster other than a real update to the mini.
If you are 17, and one of your parents just lost their job...will you be going out and getting a $1800 laptop for christmas?
If you lost your job, would you be going out getting a $1400 laptop just to have it?
Apple is down because consumers are hurting. That simple.
Tell that to the 100s of people in the apple stores every day
RIMM is the closest biz model to Apple, but smaller with a narrower product line. RIMM has faster growth rate but riskier one trick pony. Multiple carrier value chain for RIMM. So a comparison makes sense.
Amazon sells to the consumer, but it has multiple products. What gives it the edge is its web design, back end, and supply chain. Very scalable worldwide... but low margins.
Google is a totally different biz. Totally based on the internet. Extremely scalable and competing worldwide. Good depth of development. Low incremental costs, and obscene gross margins.
They are a function of the market as well. They are priced for a regular recession... but not a Great Depression. So looking at the past is like sitting on the horse backwards and looking at the horse' tail and the scenery going back.
For those of you who have not been around, this is a very disruptive economic turmoil. Not to be taken lightly... but got to keep an open mind for bargains.
Please re-read YOUR post in 6 months and see how wrong you are. There is no expansion in foreign markets. Not at all to the scale it could be. Sales will not increase in foreign markets.
Sorry Daniel, couldn't help myself