What a stupid thing to say. At a PE of more than 20x Apple needs to keep growing to justify the current pricing. They are a growth stock, not a value stock, even if you believe they will manage to keep growing.
No...they are not over 20x. Maybe you should actually take a minute to check your facts. The fact is that Apple has a lower P/E ratio than Google and a revenue growth rate Y/Y that is 3x as large.
As reflected in the comments here, a lot of people have a very hard time wrapping their brains around a company as big as Apple growing as fast as Apple. That's just not supposed to happen. Thus Apple is consistently undervalued. The upside is that Apple is a buying opportunity.
I interpreted the Asymco article about Apple being a buy-out opportunity as a tongue-in-cheek way to make an argument that the stock is undervalued. Obviously nobody is going to acquire Apple because it is far too big, but the article makes some good points about the degree to which Apple is undervalued.
Another Asymco article (can't find it right now) ponders why Apple is "undervalued" relative to other companies with similar growth rates, not to mention less than companies with lower growth rates (AMZN, anyone?). I put that word in quotes because the market wisdom may not be comforting, but it's the market wisdom, and there ain't no other that matters. Sentiments also may not change, so whether this is a "buying opportunity" depends on forces which are way out of individual investor's control, and may be too deeply engrained to change for the better. Meanwhile, we can dream of AAPL at AMZN's multiples. That would be over $1,000 today. Like I said, we can dream.
Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.
Not sure I agree on the last point. Apple's share of potential markets (other than iPods) is quite small despite their lion's share of the profits in those markets. The growth is easily 1000 percent in those markets. Then add in what's still under the covers. We know SJ is usually playing with things two or three years out and Ives is probably hard at work designing them. Then add in the potential of such things as the yet to be announced cloud ... and perhaps the new content provider rumors? AAPL has just got started
Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.
The iPad hasn't even been for sale for a full year yet and it's already outselling Macintoshes. And there are several years worth of rapid growth in that product line alone, let alone continued rapid expansion of iPhone in China, India, and elsewhere. Yes, if Apple doesn't come out with yet another revolutionary product in a few years they might start to plateau, and Jobs' absence would make that more likely. But that's years away.
Not sure if it's the invocation of Asymco, or the generally "boring" AAPL related source material but isn't this a nice productive discussion thread, devoid of trolls?
Probably because they have nowhere to go when discussing AAPL financial performance and prospects.
What a stupid thing to say. At a PE of more than 20x Apple needs to keep growing to justify the current pricing. They are a growth stock, not a value stock, even if you believe they will manage to keep growing.
Apple's trailing P/E is 18.75, and forward P/E is 12.96. That's less than Google, but more than Microsoft. Of course, they've grown much faster than either of those companies, with the lion's share of revenue from product lines that didn't exist a few years ago. (Was it really only 3.5 years ago that the original iPhone came out, and Apple made less per year than they now do per quarter?)
Do you really think the stock will triple again in 3 years? $1000 in 2013? I would not be surprised if they are trading in this same range then. $3-4 hundred.
Do you think it more likely that AAPL adding $18Bn/$4Bn rev/NI this year, more than that next year and probably 2x that in 2013 is likely to result in the same current trading range? That would surely just undervalue it even more than now (which is shockingly cheap for its performance and trends).
There is no indication that growth will slow. Apple is adding a company the size of AkzoNobel, US Bank, Bombardier Aircraft, Kimberly-Clark to its revenue - THIS YEAR!! Additional revenue almost the total size of Google. There are bigger companies (WalMart is $400M revenue per year vs Apple $82Bn) but none can grow at almost 25% per year!! (unless you are an oil company and oil prices rise).
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
Okay, but you can pull any random number out of thin air and say that it has never been done.
A $798 billion market cap company has never become a $957 billion market cap company.
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
True... I've already heard folks talk of Apple being the first trillion dollar company, though.
If Apple doesn't significantly grow its valuation, I suspect it will be for one primary reason: lack of available investment dollars. In essence, they "won" the stock market game. Many of the major funds have maxed out the percent they're allowed to put into one entity with AAPL, so where are the additional purchases going to come from? Maybe Bernake should perform quantitative easing by buying AAPL instead of treasuries?
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
In 2013 Apple will develop a feature on iPad IV that will increase a woman's bust by 2 sizes and grow hair on men... within one year they will become the world's first and only trillion dollar company...
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
Microsoft reached $583B in 1999, so Apple would just be squeaking past them if they doubled. Of course, there's a lot less liquidity in the market right now.
True... I've already heard folks talk of Apple being the first trillion dollar company, though.
If Apple doesn't significantly grow its valuation, I suspect it will be for one primary reason: lack of available investment dollars. In essence, they "won" the stock market game. Many of the major funds have maxed out the percent they're allowed to put into one entity with AAPL, so where are the additional purchases going to come from? Maybe Bernake should perform quantitative easing by buying AAPL instead of treasuries?
Everyone sells Google and MSFT and buys AAPL ... problem solved
In 2013 Apple will develop a feature on iPad IV that will increase a woman's bust by 2 sizes and grow hair on men... within one year they will become the world's first and only trillion dollar company...
Okay, but you can pull any random number out of thin air and say that it has never been done.
A $798 billion market cap company has never become a $957 billion market cap company.
See? Random numbers. Means the same thing.
Those were not random. The company is worth over $300 billion today and these analysts are talking about numbers that would put them in the $600 billion range in a couple of years. The point is rather specific and it is a valid question. Is it harder for big companies to maintain high growth rates? History says definitely yes. Will APPL remain an exception to the norm and for how long? No one knows, but there have been plenty of high flyers that have returned to earth in the past.
If Apple doesn't significantly grow its valuation, I suspect it will be for one primary reason: lack of available investment dollars. In essence, they "won" the stock market game. Many of the major funds have maxed out the percent they're allowed to put into one entity with AAPL, so where are the additional purchases going to come from? Maybe Bernake should perform quantitative easing by buying AAPL instead of treasuries?
I think you are seriously underestimating the size of the investment world by several orders of magnitude. When they hit $100 trillion that might be something to think about.
Another Asymco article (can't find it right now) ponders why Apple is "undervalued" relative to other companies with similar growth rates, not to mention less than companies with lower growth rates (AMZN, anyone?). I put that word in quotes because the market wisdom may not be comforting, but it's the market wisdom, and there ain't no other that matters. Sentiments also may not change, so whether this is a "buying opportunity" depends on forces which are way out of individual investor's control, and may be too deeply engrained to change for the better. Meanwhile, we can dream of AAPL at AMZN's multiples. That would be over $1,000 today. Like I said, we can dream.
I don't think that's quite right. If Apple's P/E today were the same as AMZN, then the market would be expecting much higher profit growth from Apple than it currently is, and Apple's stock price would not have much room to rise. In that case, there would not be a very good buying opportunity.
But because Apple's P/E is (if you believe Asymco and similar folks) too low right now, there is a buying opportunity. That doesn't mean that the P/E ratio will rise in the future... more likely it will stay the same or even fall a bit. But if earnings growth (that's the E in P/E) is above expectations, then the P will have to rise in order to keep P/E the same. And when you buy and sell a stock, you pay P, not P/E.
I think you are seriously underestimating the size of the investment world by several orders of magnitude. When they hit $100 trillion that might be something to think about.
I wasn't estimating the size of the investment world, just the size of the investment community that is not already highly invested in AAPL. Funds are not allowed (by their own bylaws, by federal law, and/or by their risk ratings) from putting more than X% into any given security. And a lot of folks have taken money out of securities since the big recession. And there's a lot less leverage out there to run up bubbles than there was 10 years ago. That means that the perceived risk of having "all your eggs in one basket" starts to be a greater and greater reason any given fund chooses not to invest in Apple. Since that risk has nothing to do with Apple's fundamentals, I would expect to see the stock price growth increasingly diverge from the earnings growth.
Comments
What a stupid thing to say. At a PE of more than 20x Apple needs to keep growing to justify the current pricing. They are a growth stock, not a value stock, even if you believe they will manage to keep growing.
No...they are not over 20x. Maybe you should actually take a minute to check your facts. The fact is that Apple has a lower P/E ratio than Google and a revenue growth rate Y/Y that is 3x as large.
As reflected in the comments here, a lot of people have a very hard time wrapping their brains around a company as big as Apple growing as fast as Apple. That's just not supposed to happen. Thus Apple is consistently undervalued. The upside is that Apple is a buying opportunity.
I interpreted the Asymco article about Apple being a buy-out opportunity as a tongue-in-cheek way to make an argument that the stock is undervalued. Obviously nobody is going to acquire Apple because it is far too big, but the article makes some good points about the degree to which Apple is undervalued.
Another Asymco article (can't find it right now) ponders why Apple is "undervalued" relative to other companies with similar growth rates, not to mention less than companies with lower growth rates (AMZN, anyone?). I put that word in quotes because the market wisdom may not be comforting, but it's the market wisdom, and there ain't no other that matters. Sentiments also may not change, so whether this is a "buying opportunity" depends on forces which are way out of individual investor's control, and may be too deeply engrained to change for the better. Meanwhile, we can dream of AAPL at AMZN's multiples. That would be over $1,000 today. Like I said, we can dream.
Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.
Not sure I agree on the last point. Apple's share of potential markets (other than iPods) is quite small despite their lion's share of the profits in those markets. The growth is easily 1000 percent in those markets. Then add in what's still under the covers. We know SJ is usually playing with things two or three years out and Ives is probably hard at work designing them. Then add in the potential of such things as the yet to be announced cloud ... and perhaps the new content provider rumors? AAPL has just got started
Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.
The iPad hasn't even been for sale for a full year yet and it's already outselling Macintoshes. And there are several years worth of rapid growth in that product line alone, let alone continued rapid expansion of iPhone in China, India, and elsewhere. Yes, if Apple doesn't come out with yet another revolutionary product in a few years they might start to plateau, and Jobs' absence would make that more likely. But that's years away.
Probably because they have nowhere to go when discussing AAPL financial performance and prospects.
Refreshing - can't last ;-)
What a stupid thing to say. At a PE of more than 20x Apple needs to keep growing to justify the current pricing. They are a growth stock, not a value stock, even if you believe they will manage to keep growing.
Apple's trailing P/E is 18.75, and forward P/E is 12.96. That's less than Google, but more than Microsoft. Of course, they've grown much faster than either of those companies, with the lion's share of revenue from product lines that didn't exist a few years ago. (Was it really only 3.5 years ago that the original iPhone came out, and Apple made less per year than they now do per quarter?)
Do you really think the stock will triple again in 3 years? $1000 in 2013? I would not be surprised if they are trading in this same range then. $3-4 hundred.
Do you think it more likely that AAPL adding $18Bn/$4Bn rev/NI this year, more than that next year and probably 2x that in 2013 is likely to result in the same current trading range? That would surely just undervalue it even more than now (which is shockingly cheap for its performance and trends).
There is no indication that growth will slow. Apple is adding a company the size of AkzoNobel, US Bank, Bombardier Aircraft, Kimberly-Clark to its revenue - THIS YEAR!! Additional revenue almost the total size of Google. There are bigger companies (WalMart is $400M revenue per year vs Apple $82Bn) but none can grow at almost 25% per year!! (unless you are an oil company and oil prices rise).
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
Okay, but you can pull any random number out of thin air and say that it has never been done.
A $798 billion market cap company has never become a $957 billion market cap company.
See? Random numbers. Means the same thing.
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
True... I've already heard folks talk of Apple being the first trillion dollar company, though.
If Apple doesn't significantly grow its valuation, I suspect it will be for one primary reason: lack of available investment dollars. In essence, they "won" the stock market game. Many of the major funds have maxed out the percent they're allowed to put into one entity with AAPL, so where are the additional purchases going to come from? Maybe Bernake should perform quantitative easing by buying AAPL instead of treasuries?
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
In 2013 Apple will develop a feature on iPad IV that will increase a woman's bust by 2 sizes and grow hair on men... within one year they will become the world's first and only trillion dollar company...
Okay, but you can pull any random number out of thin air and say that it has never been done.
A $798 billion market cap company has never become a $957 billion market cap company.
See? Random numbers. Means the same thing.
The only problem is it's not a random number. It's the market cap of AAPL right now.
Not that it can't be done, but it is very difficult to double a company from $300 billion in market cap to $600 billion. So hard in fact, that to date, it has never been done.
Microsoft reached $583B in 1999, so Apple would just be squeaking past them if they doubled. Of course, there's a lot less liquidity in the market right now.
True... I've already heard folks talk of Apple being the first trillion dollar company, though.
If Apple doesn't significantly grow its valuation, I suspect it will be for one primary reason: lack of available investment dollars. In essence, they "won" the stock market game. Many of the major funds have maxed out the percent they're allowed to put into one entity with AAPL, so where are the additional purchases going to come from? Maybe Bernake should perform quantitative easing by buying AAPL instead of treasuries?
Everyone sells Google and MSFT and buys AAPL ... problem solved
In 2013 Apple will develop a feature on iPad IV that will increase a woman's bust by 2 sizes and grow hair on men... within one year they will become the world's first and only trillion dollar company...
I have to wait till 2013?
Okay, but you can pull any random number out of thin air and say that it has never been done.
A $798 billion market cap company has never become a $957 billion market cap company.
See? Random numbers. Means the same thing.
Those were not random. The company is worth over $300 billion today and these analysts are talking about numbers that would put them in the $600 billion range in a couple of years. The point is rather specific and it is a valid question. Is it harder for big companies to maintain high growth rates? History says definitely yes. Will APPL remain an exception to the norm and for how long? No one knows, but there have been plenty of high flyers that have returned to earth in the past.
If Apple doesn't significantly grow its valuation, I suspect it will be for one primary reason: lack of available investment dollars. In essence, they "won" the stock market game. Many of the major funds have maxed out the percent they're allowed to put into one entity with AAPL, so where are the additional purchases going to come from? Maybe Bernake should perform quantitative easing by buying AAPL instead of treasuries?
I think you are seriously underestimating the size of the investment world by several orders of magnitude.
Another Asymco article (can't find it right now) ponders why Apple is "undervalued" relative to other companies with similar growth rates, not to mention less than companies with lower growth rates (AMZN, anyone?). I put that word in quotes because the market wisdom may not be comforting, but it's the market wisdom, and there ain't no other that matters. Sentiments also may not change, so whether this is a "buying opportunity" depends on forces which are way out of individual investor's control, and may be too deeply engrained to change for the better. Meanwhile, we can dream of AAPL at AMZN's multiples. That would be over $1,000 today. Like I said, we can dream.
I don't think that's quite right. If Apple's P/E today were the same as AMZN, then the market would be expecting much higher profit growth from Apple than it currently is, and Apple's stock price would not have much room to rise. In that case, there would not be a very good buying opportunity.
But because Apple's P/E is (if you believe Asymco and similar folks) too low right now, there is a buying opportunity. That doesn't mean that the P/E ratio will rise in the future... more likely it will stay the same or even fall a bit. But if earnings growth (that's the E in P/E) is above expectations, then the P will have to rise in order to keep P/E the same. And when you buy and sell a stock, you pay P, not P/E.
try WOZ
Woz is no visionary. He's a damn superior engineer, and that's just about it.
Thompson
I think you are seriously underestimating the size of the investment world by several orders of magnitude.
I wasn't estimating the size of the investment world, just the size of the investment community that is not already highly invested in AAPL. Funds are not allowed (by their own bylaws, by federal law, and/or by their risk ratings) from putting more than X% into any given security. And a lot of folks have taken money out of securities since the big recession. And there's a lot less leverage out there to run up bubbles than there was 10 years ago. That means that the perceived risk of having "all your eggs in one basket" starts to be a greater and greater reason any given fund chooses not to invest in Apple. Since that risk has nothing to do with Apple's fundamentals, I would expect to see the stock price growth increasingly diverge from the earnings growth.