RBC is my bank, the largest in Canada and, in most respects, a no nonsense bank. No flimsy evaluations where Apple stock has a target price of $235, $240 or $250 within the next 12 months.
At long last, stock analysts who analyse.
A $70 price target based on the justifications stated by the analyst makes no sense. In an efficient capital market, widely known information such as Jobs' health or the economy or the decline in consumer electronic spending is represented by the stock price in a matter of minutes. The stock will not decline further as a result of these factors, but only if new developments arise.
There is one important distinction between this and the higher ($200) estimates. The $70 target was based on previously-known information, whereas the higher targets are based upon guesses as to what the economy and consumer spending will look like 12 months from now.
Apple strength is based on its key proprietary technologies. The MacOS is extremely stable since it based on Unix. The iPhone and the new iPods are based on the same OS. Even iTunes is proprietary. Nobody else has this combo of technologies along with product design.
The main impediment is that iPhone is offered to a limited number of carriers. After they break loose of the likes of ATT, Apple can offer multimode iPhones with CDMA, GSM, EDGE and WCDMA radios include and sold in open channels.
Short term, I would love a nasty price drop... so I can buy shares. Taking out the $30B cash out, and including the deferred revenues of iPhone, the PE is already dirt cheap.
Short term, I would love a nasty price drop... so I can buy shares. Taking out the $30B cash out, and including the deferred revenues of iPhone, the PE is already dirt cheap.
I don't think you are going to get a price drop bigger than we just had. What worse news are you expecting? This is the bottom.
Dell is at 2x cash, Apple is at 3.5x cash. Dell is taking a hit on margins and sales; Apple is really just taking a small hit on sales (based on consumer spending). Apple is showing year-over-year growth in unit sales (although average selling price is likely trending down).
The question is ultimately if Apple is going to see market erosion in the iPhone and MacBook lines. The iPhone has a number of viable competitors gaining market share on the "touch screen smartphone" segent-- in the US, the BB Storm is especially damaging, because it is a very good fit for Verizon customers that don't want to switch. Likewise, the Macbook franchise is feeling pressure from Netbooks and extended consumer refresh timelines. Windows 7 is due out by late summer, and it might not completely suck.
So to that end, in the next 6-12 months, will Apple release products that will counter that cycle? Snow Leopard seems to be a defensive play rather than innovative. Will a new iPhone be released that has the "missing features" that should have been there all along? Will they offer something that competes with the Netbooks? Will they continue to innovate on the iPod Touch? Will their present management team be able to deliver on these and future challenges to Apple's ongoing growth? (These questions and many more to be answered on the next edition of Soap!)
I'm pretty much resolved that Apple will stay below $100 for the next 12 months (at least the 30 day EMA). However, nothing that I have seen so far suggests that there should be further price erosion. SJ was already priced in, as was the $1.44 2009Q1 earnings.
Good for you ! RBC-Royal Bank, Bank of Montreal, TD-Toronto-Dominion, and CIBC-Canadian Imperial Bank of Commerce, all received billions of dollars from the Canadian Government 6 weeks ago to assist them in these "uncertain financial times". I would not take any advice from an organization that is incapable of navigating their own liquidity (ie: having enough management brains to know how much capital they need on hand to protect themselves from a bad financial economy ). Let's not forget that the Royal Bank's "proprietary Changewave survey" does not account for any future technologies, or innovations that a firm like Apple can offer and which - as has been seen with the iPod and the iPhone - entirely new profitable markets (software and music downloads, etc) can be created out of nothing. Stock analysts, for the most part, only looks at past indicators and statistical inputs.
I'm pretty much resolved that Apple will stay below $100 for the next 12 months (at least the 30 day EMA). However, nothing that I have seen so far suggests that there should be further price erosion. SJ was already priced in, as was the $1.44 2009Q1 earnings.
you pose a very intelligent argument. and I hope you are dead wrong. Acer is killing with these netbooks, which is pretty surprising to me, but then, if joe consumer was made to cough up 200 bucks a year for the newest ipod, why not 3-500 a year for the newest netbook?
I smell an analyst who is trying to make a killing by selling short. The opposite of "pump and dump" is "hump and dump."
Very keen observation. When will the US and Canadian authorities look into if such analysts are actually to influence a stock price by "shorting it" in the public domain. Frankly, I am a little distressed that these analysts base their comments on weird calculations using everything but Price-to-Earnings (P/E) stats...and are allowed to get away with it. What a dead give away.
you pose a very intelligent argument. and I hope you are dead wrong. Acer is killing with these netbooks, which is pretty surprising to me, but then, if joe consumer was made to cough up 200 bucks a year for the newest ipod, why not 3-500 a year for the newest netbook?
As for the "netbook" market....we will look back at this era of the tech age and we will clearly see it for what it is: Steve Jobs has missed an important opportunity, just like Bill Gates missed the internet before him. Corner Office Syndrome: nobody tells Steve when its time to act like Steve. He will dive into netbooks when he is good and ready (2010).
As for the "netbook" market....we will look back at this era of the tech age and we will clearly see it for what it is: Steve Jobs has missed an important opportunity, just like Bill Gates missed the internet before him. Corner Office Syndrome: nobody tells Steve when its time to act like Steve. He will dive into netbooks when he is good and ready (2010).
only $10 lower...?? with the worst of the recession still in front. The likely non return of the iconic leader, dated desktop products, more expensive notebook products. Strange pro decisions (battery), and saturation of main market (ipod) and softening demand for iphones?
I've been trying to understand what shorts are. Well, I think I understand how they are done, but I don't understand why they're allowed or why they're needed.
(I am cutting and pasting a reply of mine on a similar question that someone else had, on Jan 5, 2009):
'Shorts' are short-sellers. They bet on a price decline, and make money if that expectation is borne out. Essentially, they sell stock that they do not own, by borrowing it from someone who owns it; if the short-sellers' expectation proves correct and the price falls, they buy it at the lower market price and return it to the person that they originally borrowed the stock from, thereby making a profit. If the price goes up instead, they lose money since they have to buy it at a price higher than at which they sold. See, for instance, http://www.sec.gov/answers/shortsale.htm
You can make a similar bet with put options and protect yourself on the downside (but options cost you money up front).
Some people blame short-sellers for stock price manipulation since they believe they have the incentive to leak adverse news to the market to drive down share prices. Others vehemently disagree.
What is inarguable is: (i) Short selling is perfectly legal; (ii) It is a necessary component of information flows that helps to make the market efficient since it provides the counterpoint to unduly optimistic and rose-colored views that might otherwise prevail, driving the value of the stock away from its fundamentals in the other direction.
Frankly, I am a little distressed that these analysts base their comments on weird calculations using everything but Price-to-Earnings (P/E) stats...and are allowed to get away with it.
Well, the 'P/E' itself is a short-hand (and arguably lazy) metric that captures the effect of long-run expected growth in a company's cash flows and its 'cost of capital' (or the return that investors expect to get from risk-equivalent assets).
In other words, the 'P/E' is never a substitute for (what is commonly referred to as) a 'discounted cash flow' (DCF) analysis.
There are many reasons for the shares of Apple to be downgraded to a price target of $70. Here are a few reasons:
.....
Most of the items on your list are nothing new. Your issues with Apple's product mix, AppleTV, their margins, etc, etc have existed for months and years. So assuming this analyst did his job when he set his $125 target, all of those reasons should support that target. Even questions about Steve Job's health have been issues for nealy 6 months now. His taking a leave of absence now indicates that the health issues are more serious than we thought. So sure, that is a reason to downgrade. But cutting the target nearly in half?
Additionally, their "Changewave" survey is comparing projected purchases for the next 90 days to results for the same question in Sep and Nov of last year. How about comparing it to survey results from one year ago! You can't compare 4th quarter '08 to 1st quarter '09 because of seasonality. Or do they not have a holiday shopping season in Canada?
I think Steve's leave of absence is one of the best things to happen in years because it will allow him to receive the treatment he needs and will allow Apple to demonstrate that it can be successful without him there every day of the week.
Apple wouldn't be a successful company if their success hinged on one man so we already know they can do without him cracking the whip every day. In fact, they might even run better without the shadow of Steve looming over everyone.
...if joe consumer was made to cough up 200 bucks a year for the newest ipod, why not 3-500 a year for the newest netbook?
The classic argument would be that the iPod offered incremental value at a discretionary purchase price. Currently, Apple is banking on their Mac users to shell out $100 every other year for the newest OSX, and maybe even another $150 or so each year between iLife and iWork. I'd argue that these moves are really intended more to incentiveize people to refresh the hardware faster based on personal experience.
For most people, a computer is purely a functional device. A growing number view it as a fashion accessory, which would play well into your argument of more rapid refresh cycles
Another data point is RIMM on the stock prices; they trade at 30x cash (bad valuation metric for them), and 16.5x TTM Earnings. If you take cash out of the stock price and assume AAPL's earnings are flat for the year then you are giving RIMM a 70% premium.
While I do think RIMM is a little more insulated from the current downturn that AAPL, I don't think they deserve a 70% premium (maybe closer to a 30 or 40% )
There are many reasons for the shares of Apple to be downgraded to a price target of $70. Here are a few reasons:
1- There are no reasons, absolutely no reasons, for Apple to carry a higher valuation or higher multiple for its shares than competing companies listed on the NASDQ Stock Exchange;
2- Appple's growth is slowing down as evidenced by unofficial sales numbers for Macs and iPhones over the last 2 months;
.....and so on and so on...
If you go in such details about Apple and think its doing bad, then what about companies that in the s**t hole?
Big secret for you, these kind of things have been always around for every company, including Apple. Speculations, lying, lawsuits. That's what big corporations do. Apple is just very publicly popular and is a trend so the facts are blown out of proportions.
I would worry about overall US economy, not just Apple.
Comments
"The opposite of "pump and dump" is "hump and dump.""
Actually, it's "short and distort."
An inverse Reality Distortion Field? That could create a black hole and destroy the Earth!
RBC is my bank, the largest in Canada and, in most respects, a no nonsense bank. No flimsy evaluations where Apple stock has a target price of $235, $240 or $250 within the next 12 months.
At long last, stock analysts who analyse.
A $70 price target based on the justifications stated by the analyst makes no sense. In an efficient capital market, widely known information such as Jobs' health or the economy or the decline in consumer electronic spending is represented by the stock price in a matter of minutes. The stock will not decline further as a result of these factors, but only if new developments arise.
There is one important distinction between this and the higher ($200) estimates. The $70 target was based on previously-known information, whereas the higher targets are based upon guesses as to what the economy and consumer spending will look like 12 months from now.
So THAT'S why Macs cost so much.
The main impediment is that iPhone is offered to a limited number of carriers. After they break loose of the likes of ATT, Apple can offer multimode iPhones with CDMA, GSM, EDGE and WCDMA radios include and sold in open channels.
Short term, I would love a nasty price drop... so I can buy shares. Taking out the $30B cash out, and including the deferred revenues of iPhone, the PE is already dirt cheap.
Short term, I would love a nasty price drop... so I can buy shares. Taking out the $30B cash out, and including the deferred revenues of iPhone, the PE is already dirt cheap.
I don't think you are going to get a price drop bigger than we just had. What worse news are you expecting? This is the bottom.
The question is ultimately if Apple is going to see market erosion in the iPhone and MacBook lines. The iPhone has a number of viable competitors gaining market share on the "touch screen smartphone" segent-- in the US, the BB Storm is especially damaging, because it is a very good fit for Verizon customers that don't want to switch. Likewise, the Macbook franchise is feeling pressure from Netbooks and extended consumer refresh timelines. Windows 7 is due out by late summer, and it might not completely suck.
So to that end, in the next 6-12 months, will Apple release products that will counter that cycle? Snow Leopard seems to be a defensive play rather than innovative. Will a new iPhone be released that has the "missing features" that should have been there all along? Will they offer something that competes with the Netbooks? Will they continue to innovate on the iPod Touch? Will their present management team be able to deliver on these and future challenges to Apple's ongoing growth? (These questions and many more to be answered on the next edition of Soap!)
I'm pretty much resolved that Apple will stay below $100 for the next 12 months (at least the 30 day EMA). However, nothing that I have seen so far suggests that there should be further price erosion. SJ was already priced in, as was the $1.44 2009Q1 earnings.
I will close my account at RBC today. Morons.
Good for you ! RBC-Royal Bank, Bank of Montreal, TD-Toronto-Dominion, and CIBC-Canadian Imperial Bank of Commerce, all received billions of dollars from the Canadian Government 6 weeks ago to assist them in these "uncertain financial times". I would not take any advice from an organization that is incapable of navigating their own liquidity (ie: having enough management brains to know how much capital they need on hand to protect themselves from a bad financial economy ). Let's not forget that the Royal Bank's "proprietary Changewave survey" does not account for any future technologies, or innovations that a firm like Apple can offer and which - as has been seen with the iPod and the iPhone - entirely new profitable markets (software and music downloads, etc) can be created out of nothing. Stock analysts, for the most part, only looks at past indicators and statistical inputs.
I don't think you are going to get a price drop bigger than we just had. What worse news are you expecting? This is the bottom.
no doubt. short of a pending war with China and suspended trade relations (knock on wood) I can't imagine anything worse than Steve stepping aside.
I'm pretty much resolved that Apple will stay below $100 for the next 12 months (at least the 30 day EMA). However, nothing that I have seen so far suggests that there should be further price erosion. SJ was already priced in, as was the $1.44 2009Q1 earnings.
you pose a very intelligent argument. and I hope you are dead wrong. Acer is killing with these netbooks, which is pretty surprising to me, but then, if joe consumer was made to cough up 200 bucks a year for the newest ipod, why not 3-500 a year for the newest netbook?
I smell an analyst who is trying to make a killing by selling short. The opposite of "pump and dump" is "hump and dump."
Very keen observation. When will the US and Canadian authorities look into if such analysts are actually to influence a stock price by "shorting it" in the public domain. Frankly, I am a little distressed that these analysts base their comments on weird calculations using everything but Price-to-Earnings (P/E) stats...and are allowed to get away with it. What a dead give away.
you pose a very intelligent argument. and I hope you are dead wrong. Acer is killing with these netbooks, which is pretty surprising to me, but then, if joe consumer was made to cough up 200 bucks a year for the newest ipod, why not 3-500 a year for the newest netbook?
As for the "netbook" market....we will look back at this era of the tech age and we will clearly see it for what it is: Steve Jobs has missed an important opportunity, just like Bill Gates missed the internet before him. Corner Office Syndrome: nobody tells Steve when its time to act like Steve. He will dive into netbooks when he is good and ready (2010).
As for the "netbook" market....we will look back at this era of the tech age and we will clearly see it for what it is: Steve Jobs has missed an important opportunity, just like Bill Gates missed the internet before him. Corner Office Syndrome: nobody tells Steve when its time to act like Steve. He will dive into netbooks when he is good and ready (2010).
only $10 lower...?? with the worst of the recession still in front. The likely non return of the iconic leader, dated desktop products, more expensive notebook products. Strange pro decisions (battery), and saturation of main market (ipod) and softening demand for iphones?
plus MS can't stay this bad for much longer...
I'd say this is an optimistic analyst assessment.
I've been trying to understand what shorts are. Well, I think I understand how they are done, but I don't understand why they're allowed or why they're needed.
(I am cutting and pasting a reply of mine on a similar question that someone else had, on Jan 5, 2009):
'Shorts' are short-sellers. They bet on a price decline, and make money if that expectation is borne out. Essentially, they sell stock that they do not own, by borrowing it from someone who owns it; if the short-sellers' expectation proves correct and the price falls, they buy it at the lower market price and return it to the person that they originally borrowed the stock from, thereby making a profit. If the price goes up instead, they lose money since they have to buy it at a price higher than at which they sold. See, for instance, http://www.sec.gov/answers/shortsale.htm
You can make a similar bet with put options and protect yourself on the downside (but options cost you money up front).
Some people blame short-sellers for stock price manipulation since they believe they have the incentive to leak adverse news to the market to drive down share prices. Others vehemently disagree.
What is inarguable is: (i) Short selling is perfectly legal; (ii) It is a necessary component of information flows that helps to make the market efficient since it provides the counterpoint to unduly optimistic and rose-colored views that might otherwise prevail, driving the value of the stock away from its fundamentals in the other direction.
Frankly, I am a little distressed that these analysts base their comments on weird calculations using everything but Price-to-Earnings (P/E) stats...and are allowed to get away with it.
Well, the 'P/E' itself is a short-hand (and arguably lazy) metric that captures the effect of long-run expected growth in a company's cash flows and its 'cost of capital' (or the return that investors expect to get from risk-equivalent assets).
In other words, the 'P/E' is never a substitute for (what is commonly referred to as) a 'discounted cash flow' (DCF) analysis.
There are many reasons for the shares of Apple to be downgraded to a price target of $70. Here are a few reasons:
.....
Most of the items on your list are nothing new. Your issues with Apple's product mix, AppleTV, their margins, etc, etc have existed for months and years. So assuming this analyst did his job when he set his $125 target, all of those reasons should support that target. Even questions about Steve Job's health have been issues for nealy 6 months now. His taking a leave of absence now indicates that the health issues are more serious than we thought. So sure, that is a reason to downgrade. But cutting the target nearly in half?
Additionally, their "Changewave" survey is comparing projected purchases for the next 90 days to results for the same question in Sep and Nov of last year. How about comparing it to survey results from one year ago! You can't compare 4th quarter '08 to 1st quarter '09 because of seasonality. Or do they not have a holiday shopping season in Canada?
Apple wouldn't be a successful company if their success hinged on one man so we already know they can do without him cracking the whip every day. In fact, they might even run better without the shadow of Steve looming over everyone.
...if joe consumer was made to cough up 200 bucks a year for the newest ipod, why not 3-500 a year for the newest netbook?
The classic argument would be that the iPod offered incremental value at a discretionary purchase price. Currently, Apple is banking on their Mac users to shell out $100 every other year for the newest OSX, and maybe even another $150 or so each year between iLife and iWork. I'd argue that these moves are really intended more to incentiveize people to refresh the hardware faster based on personal experience.
For most people, a computer is purely a functional device. A growing number view it as a fashion accessory, which would play well into your argument of more rapid refresh cycles
Another data point is RIMM on the stock prices; they trade at 30x cash (bad valuation metric for them), and 16.5x TTM Earnings. If you take cash out of the stock price and assume AAPL's earnings are flat for the year then you are giving RIMM a 70% premium.
While I do think RIMM is a little more insulated from the current downturn that AAPL, I don't think they deserve a 70% premium (maybe closer to a 30 or 40% )
You seem to know about as much as this analyst does, which is zilcho. No wonder that you think he 'analyzes'.
Mind explaining to us how exactly the "Steve Jobs premium" was 5X earnings, or do you know the orifice that he pulled it out of?
not sure why you quoted and then misspelled.
no one will know what will happen to the stock: there could be an earthquake and apple swallowed whole: no one knows.
There are many reasons for the shares of Apple to be downgraded to a price target of $70. Here are a few reasons:
1- There are no reasons, absolutely no reasons, for Apple to carry a higher valuation or higher multiple for its shares than competing companies listed on the NASDQ Stock Exchange;
2- Appple's growth is slowing down as evidenced by unofficial sales numbers for Macs and iPhones over the last 2 months;
.....and so on and so on...
If you go in such details about Apple and think its doing bad, then what about companies that in the s**t hole?
Big secret for you, these kind of things have been always around for every company, including Apple. Speculations, lying, lawsuits. That's what big corporations do. Apple is just very publicly popular and is a trend so the facts are blown out of proportions.
I would worry about overall US economy, not just Apple.
not sure why you quoted and then misspelled.
Carelessness on my part: I noticed a little later that he had spelled it as 'analyse'.