Apple may be undervalued, but it looks like it's going to be more undervalued moving towards the new year. Nothing seems to be stopping Apple's continued share price drop. No matter how good a quarter Apple has, it's well assured that Apple's share price will not return to former levels. It's too late for that this year. Wall Street has already given Apple up for dead along with the late Steve Jobs.
Wall Street is betting that Apple has no future but I'm rather curious about what consumer computer/tech company Wall Street claims does have a future. Dell? H-P? Acer? Lenovo? They all appear to be falling by the wayside and yet Wall Street is still betting against Apple's future. It doesn't make a bit of sense to me. Does Wall Street really believe that Microsoft and partners are going to easily rise again to strike Apple down? I think Apple will continue to make it harder for individual companies to go against them and still be profitable. Apple can easily afford to grab up all components in advance so that the competition is left with table scraps.
Apple continues to open more stores, sell more products, reap higher revenues and profits in a weak economy and yet the share value continues to fall. How can one company be running that strongly and still can't manage to hold ground in value? Wall Street's tossing away the value of fundamentals is absolutely criminal. As was mentioned earlier, Wall Street seems to operate like some Las Vegas casino. What's also puzzling is when Steve Jobs was alive, there was his health and succession plans holding Apple shares down. Now that Steve Jobs is dead, the doubt of future innovation without Steve Jobs is holding Apple shares down. It appears to be an unsolvable no-win situation for Apple investors. As an Apple long shareholder, I've pretty much given up hope of Apple getting any respect from Wall Street no matter how much revenue Apple earns.
It's really simple. You don't buy a stock based on what it did in the past or even what it did today. You buy a stock for its future performance.
It's quite obvious that the market doesn't have much faith in Apple without Jobs, and the underwhelming launch of the iPhone 4S didn't help. And yes, I'm well aware of the spin of the fastest selling iPhone ever -- a complete miracle considering it went on sale in far more countries the first day than the iPhone 4 did.
The percentage growth rate AAPL has been on has been stunning, to be sure. But the low P/E indicates that the market, as a whole, thinks the ride is over and that kind of growth is not going to continue. Especially sans Jobs.
Statistically, AAPL is undervalued for its current earnings. No doubt. But I know a great many people who now won't touch AAPL stock.
I agree with you that you buy stock based on future performance. But doesn't past performance give a clue of future performance? Would you buy stock in a company that released quarter after quarter of sucky earnings? The only reason you would buy is if you were very sure the company would post a profit later on.
Apple was undervalued even when Jobs was alive. And the iPads that people are buying today are the same iPads that people were buying when Jobs was alive.
What I am about to say isn't new but its important to add...
The analysis of Apple's stock and valued perforance was, in this story, fantastic.
I would VERY much like to have the same author work equally as hard on analysing WHY Apple's stock is being "ignored".
Do some fear an Apple bubble? Or does Apple care at all? IF Apple continues to perform and out-perform as it has in the last 4 years, and IF their cash base continues to grow they could start buying back their shares, no? Then what?
I would like to know the WHY and HOW if this WHAT subject.
Thanks.
I was aware of much of this, but not all, and when stacked together this way, it is breathtaking. I don't like to engage in conspiracy theories, but I can't help but get the feeling that either somebody of institutional size wants into apple in a big way, or they are shorting and cheating. The phenomenon is undeniable.
The numbers do not lie. Parse away Zaky's glowing opinions all you want, his numbers don't lie. You can not argue the facts.
I agree with you that you buy stock based on future performance. But doesn't past performance give a clue of future performance? Would you buy stock in a company that released quarter after quarter of sucky earnings? The only reason you would buy is if you were very sure the company would post a profit later on.
Apple was undervalued even when Jobs was alive. And the iPads that people are buying today are the same iPads that people were buying when Jobs was alive.
Apple investors are waiting for the *next big thing*. All of the great revenue generators have already been released, and, therefore, blessed by the great Jobs while he was still alive. Stock price is about the future. Wall Street needs to see a great new iPad 3, a great new radically refreshed iPhone and the next sales growth generator......the new, non-hobby AppleTV.
The product pipeline has already been laid for the next 5 years, IMHO. Wall Street and investors need to see those future products and have them light the world on fire, like is expected of Apple, before they jump in head-first again. Until then, they'll only be getting their toes wet by very conservatively following Apple's sales revenue dollars (and margin) with their investment dollars....hence the current P/E compression.
My 2 cents.
EDIT: The stock has been undervalued ever since Wall Street had the prospect of Apple without Steve Jobs in the back of their mind, which has been fueled by the health rumor mill for many, many years......since the 'C' word was brought to light.
I agree the stock is completely undervalued, as the article points out again, and again, and again. And as anyone who is so inclined can see for themselves if they analyzed Apple's 10q/k's (tip of the hat to Andy for doing the extensive amount of legwork, though).
I'd be much more interested in a discussion of just WHY apple is so undervalued and why the CNBC-types are so useless (the story that iPod sales are slowing is a tragic miscarriage of journalism and the reporters / producers of that segment should be fired). So, why are they so bad? Why is the stock so undervalued?
Possibly the wall street guys still use windows and blackberrys.
There is no "bottom" to PE compression (or PEG compression for that matter). Apple's cas will be impacted by their new campus and other strategic investments. The current PE of 8 sans-cash could be viewed as 10% growth after marginal risk/interest requirements over 6 years.
All this said, still long AAPL, although I need to diversify.
What's this based upon? Most of the data is Apple w/ Jobs. And if you're counting medical leaves, AAPL has hit all-time highs in share price w/out Jobs as CEO, as in 2011.
Jobs was still alive for most of 2011. Now he isn't.
Idiot. Do you have an actual response to this person's claims, are you just trolling yourself, or do you believe that every opinion which runs counter to yours is a personal attack (in which case, please get over yourself) !!
Apple may be undervalued, but it looks like it's going to be more undervalued moving towards the new year. Nothing seems to be stopping Apple's continued share price drop. No matter how good a quarter Apple has, it's well assured that Apple's share price will not return to former levels. It's too late for that this year. Wall Street has already given Apple up for dead along with the late Steve Jobs.
Wall Street is betting that Apple has no future but I'm rather curious about what consumer computer/tech company Wall Street claims does have a future. Dell? H-P? Acer? Lenovo? They all appear to be falling by the wayside and yet Wall Street is still betting against Apple's future. It doesn't make a bit of sense to me. Does Wall Street really believe that Microsoft and partners are going to easily rise again to strike Apple down? I think Apple will continue to make it harder for individual companies to go against them and still be profitable. Apple can easily afford to grab up all components in advance so that the competition is left with table scraps.
Apple continues to open more stores, sell more products, reap higher revenues and profits in a weak economy and yet the share value continues to fall. How can one company be running that strongly and still can't manage to hold ground in value? Wall Street's tossing away the value of fundamentals is absolutely criminal. As was mentioned earlier, Wall Street seems to operate like some Las Vegas casino. What's also puzzling is when Steve Jobs was alive, there was his health and succession plans holding Apple shares down. Now that Steve Jobs is dead, the doubt of future innovation without Steve Jobs is holding Apple shares down. It appears to be an unsolvable no-win situation for Apple investors. As an Apple long shareholder, I've pretty much given up hope of Apple getting any respect from Wall Street no matter how much revenue Apple earns.
So....Apple is something Wall Street does not understand. They don't make widgets. Not in the traditional sense. By the time everybody figured out what kind of widget the iPod was, we had iPhone....before they figured out iPhone there was iPad, etc...Wall Street does not think with creativity, and can not understand the big picture with Apple and what they do for the lives of their customers, right?
Add to that the fact that Apple is notoriously close to the vest. Apple probably refuses to play Wall Street games, and I would not be surprised if Apple doesn't make time to hang in Wall Street nightclubs, bars and social circles, to be simplistic in my analogy. So Wall Street ignores Apple, because Apple won't come to their parties...?
Moreover, this article nicely shows why the concept of investing is dead. If the markets were investment driven by any calculation Apple's stock price would be significantly higher.
So what are you going to do about it other than "piss and moan". Seriously, all you whining sycophants can protest all you want, but welcome to reality. Yes, AAPL is hugely undervalued from a fundamental perspective and yes, that hurts as I am Long but I am not a little baby crying "Wah, Wah !!". This is the stock market - we are playing with adults in a large group who do not care about each of us individually. If they don't want to buy AAPL and that causes us pain, then so be it ... none of us were forced to "invest" in the share market, and all this crying about how unfairly we are being treated by some anonymous, amorphous large group of other people is neither helpful nor mature. Stock market = risks. Perform Due Dilligence, BUT understand this may not be enough - even people who can card count must lose a hand or two in the casino.
But if Apple doesn't pay dividends, what do sales and earnings have to do with stock price? Stockholders aren't getting a dime of that money.
They should be getting capital appreciation on the share price based upon increased sales and earnings etc. This was the whole point of the article - or do you just believe that every share which does not pay a dividend (there are more than a few) is worthless because of your erroneous belief that "stockholders aren't getting a dime of that money." ?
I was aware of much of this, but not all, and when stacked together this way, it is breathtaking. I don't like to engage in conspiracy theories, but I can't help but get the feeling that either somebody of institutional size wants into apple in a big way, or they are shorting and cheating. The phenomenon is undeniable.
The numbers do not lie. Parse away Zaky's glowing opinions all you want, his numbers don't lie. You can not argue the facts.
While I completely agree with Zaky's article (like you say, the numbers dont lie), there is no conspiracy. A conspiracy to keep the share price of a company of Apple's size down would have to be mind-blowingly widespread and huge, and would involve ridiculous sums of money.
I think it will be great if Andy goes into the Why's of Apple's low share price. My guesses are:
1) Apple's growth is greatly predicated on releasing one blockbuster product after another. Never before have we seen a company release as many blockbuster products as Apple has. The closest is probably Microsoft, with Windows and Office, but those 2 products have been around for decades. Apple has only in the last decade released OS X based macs, iPods, iPhones, iPads all of which are huge products monetarily. (Dont get me wrong. I am not saying other companies dont release new products. However, no one has been able to consistenly enter new market segments with products that are blockbusters financially. Even Google, which has released a ton of popular new products continues to rely on AdSense for nearly all its revenue). People just dont have a historical precedent to compare Apple to, which makes it harder for them to understand it.
2) No other company of Apple's size has grown as quickly as Apple has over the last couple of years. Again, lack of historical precedence means people find Apple hard to understand.
3) While their numbers tell one story, the numbers often seem fantastic. e.g., Despite the huge amounts of money the iPhone is making, and despite the fact that Apple takes in more than half the industry profits, the numbers clearly show there is still tons of room for Apple to grow. The smartphone market is stell far less than 50% of the entire cellphone market, and its reasonable to assume that in 5 years nearly every phone sold will be a smartphone. This means that even if Apple maintains its share, its iPhone numbers should nearly double. This almost sounds unbelievable.
So what are you going to do about it other than "piss and moan". Seriously, all you whining sycophants can protest all you want, but welcome to reality. Yes, AAPL is hugely undervalued from a fundamental perspective and yes, that hurts as I am Long but I am not a little baby crying "Wah, Wah !!". This is the stock market - we are playing with adults in a large group who do not care about each of us individually. If they don't want to buy AAPL and that causes us pain, then so be it ... none of us were forced to "invest" in the share market, and all this crying about how unfairly we are being treated by some anonymous, amorphous large group of other people is neither helpful nor mature. Stock market = risks. Perform Due Dilligence, BUT understand this may not be enough - even people who can card count must lose a hand or two in the casino.
Actually, no, this isnt the stock market. This is a forum that is discussing the stock market. I am not sure what you are whining about, because forums are designed for one thing, and one thing only?expressing your opinions.
Actually, no, this isnt the stock market. This is a forum that is discussing the stock market. I am not sure what you are whining about, because forums are designed for one thing, and one thing only…expressing your opinions.
Yes - this is a forum discussing the stock market, which is exactly my point - this is the stock market we are talking about (how could you not even get this ?), yet people are postulating about widespread institutional conspiracies and vendettas against AAPL and how everything is essentially just not fair (as though "fairness" was somehow promised to them when they entered the share market - I must have missed that part of the brochure or skipped that part of the tour). I'm whining about the whining on this forum (you would think the stock market is an investment vehicle designed for 6 year old girls from all the irrational venting thus far) and about the lack of reasonable discussion. As this is a forum, other people have the right to do this, and as a forum I have the right to complain about, and disagree with what they are saying. Pretty simple really !
Part of the problem is the Stock market has long since drifted from a place to invest money. Investing means contributing money to a company to help it grow and to benefit from that "investment" if the company does in fact grow. Now, however, with the concept of short selling (and all the off shoots of that) the stock market has become nothing more than legalized gambling. You short the stock if you are gambling the stock will go down. Those who short the stock have a build in incentive to drive the price of a stock down. That is not investing. Further, it directly hurts businesses to have forces purposely rooting for its stock to go down, in turn, hurting real investors. What really stinks is those who short stocks are allowed to borrow the stocks of those who are so called investing of the stocks to work against the investors to try and drive the price down.
Moreover, this article nicely shows why the concept of investing is dead. If the markets were investment driven by any calculation Apple's stock price would be significantly higher.
Frankly, your understanding of the stock market is wrong. The stock market is NOT a place to invest in companies to help them grow. Any investments you make in the secondary market (which is what nearly all transactions, excepting IPOs, which regular investors can nearly never get into) does NOT go to the company at all.
The secondary market exists to provide liquidity for investors. This helps a company grow indirectly by providing angle investors, venture capitalists, and entrpreneurs an exit strategy. A long time ago companies used to go public to raise funds for expansion, but this is rare now (and even rarer still in the Tech industry, where capital investments can easily be covered by a few VCs).
Once you recognize that the Secondary market (i.e. Stock exchanges) are not intended to grow a company, but rather to provide liquidity, you will recognize why short selling is essential.
(1) There is nothing wrong in selling short, because if someone sells a stock at a certain price because they think it will go down, that means there is someone on the other end who buys it at that price because they think it will go up. It is a fair exchange.
(2) Yes, there is a risk in people having an incentive in driving down the price of a stock. However, if there was no short selling, then there would ONLY be incentives for people to raise the price of a stock. No one would be talking about the negatives. People would ONLY be talking about the good stuff, making everything seem hunky dory, driving the stock price up, until reality was exposed and the bubble burst. Short sellers have an incentive to expose negative news too.
The real problem is that disclosure laws are too lax, easily circumvented, and hardly enforced. Which means people can get away with a whole lot of crap. In reality, it isnt too much negative news that is the problem in the stock exchange right now, but rather, the presence of too many cheerleaders that is a problem. The classic example is CNBC. They have a HUGE incentive to downplay negatives and only talk about how well the stock market is doing, hence blowing up bubbles even more (because stock markets going up means more people invest means more people watch CNBC). It has become less egregious since the downturn, because they were so awfully wrong, but the bias towards cheerleading and ignoring negatives still exist. (As an aside, Bloomberg is usually a better bet than CNBC, because their source of revenue is financial professionals themselves, and the news dept is not expected to make money. They focus a little more on reality than cheerleading because that is what their clients are paying them 2k a year for).
Yes - this is a forum discussing the stock market, which is exactly my point - this is the stock market we are talking about (how could you not even get this ?), yet people are postulating about widespread institutional conspiracies and vendettas against AAPL and how everything is essentially just not fair (as though "fairness" was somehow promised to them when they entered the share market - I must have missed that part of the brochure or skipped that part of the tour). I'm whining about the whining on this forum (you would think the stock market is an investment vehicle designed for 6 year old girls from all the irrational venting thus far) and about the lack of reasonable discussion. As this is a forum, other people have the right to do this, and as a forum I have the right to complain about, and disagree with what they are saying. Pretty simple really !
I misunderstood the spirit of your post. If you see my earlier/later posts, you will see we are largely in agreement on the conspiracy/fairness concepts.
I misunderstood the spirit of your post. If you see my earlier/later posts, you will see we are largely in agreement on the conspiracy/fairness concepts.
Yes - I got that we basically agree from your posts, and thank-you for clearing up some of the misconceptions many people here are harbouring under (re: short selling, company fund raising, malevolent institutions with a grudge against apple etc.)
As regards the substance of the article, I agree entirely, but it has been obvious for quite some time now that AAPL is an undervalued stock (ANY time you hear Value investors in total accord with Growth investors about a company's merits, you know something is likely awry). However, I do not think this necessarily means Apple won't continue to be undervalued by the stock market and over what time-frame ... no-one does. Therefore, I guess what I'm saying is that whilst the fundamentals state AAPL is wildly undervalued, unless other people start to agree with us and start buying large amounts of AAPL, maybe it ISN'T entirely "undervalued" per se - "eye of the beholder" and all that ...
It is too easy to say Apple's P/E ratio is low because of uncertainties due to the loss of Steve Jobs.
As far as I can remember back, Apple always had an unusually low P/E. This is not a recent development. It's been like that before Jobs re-joined Apple.
Here are my 2 cents as to why:
P/Es are typically different for different industries. And average P/Es are best derived from comparing like companies.
Now with Apple, analysts always had a hard time comparing it to like companies.
What's a company like Apple?
Apple pretty much has been its own beast ever since its early days.
Apple has lots of intellectual property, but not a lot of real assets. A bit like Microsoft or Google one could argue.
Such companies can easily burst like a bubble, which is why they often have extreme (low or high) P/E ratios.
Yet with Microsoft and Google, both have dominant market positions guaranteeing them earnings for years to come.
Apple is perhaps more volatile. They depend on bringing out new hardware hits year after year. A bad streak of misfires could bring the bubble to burst.
With corporations slowly changing their ways, Microsoft is in a better position, they can have a bunch of misfires before it gets really bad for them.
Same for Google. They will be wealthy for as long as there is advertisement on the Internet.
Basically Apple cannot be compared to Microsoft nor Google as easily, so Apple's P/E won't correlate to theirs.
Yet Apple is not a typical hardware company either. Manufacturing changed, and nowadays Apple has no factories or other 'hard' assets. Inventory is low too.
So you cannot really compare it to let's say a car manufacturer (who would also typically create their own designs from A-Z).
Apple might also be compared to a luxury goods brand, something like an expensive designer clothes, spirits or watch manufacturer. Yet comparing those P/Es won't work either. People typically buy computers more often than really expensive watches, while much less often than clothes or spirits. How many designer clothes can you have in your wardrobe compared to mobile phones in your bag?
It's not comparable, which makes deriving of the correct P/E for Apple difficult.
And finally, Apple did almost go under in 1996/97 and I think this also still reflects on the current P/E. If luck changes and with no other Jobs around, the next time Apple could very well go under. That uncertainty is built into Apple ever since.
All these factors combined turn Apple into such a unique beast. So based on what should its average P/E be?
It's guesswork, really.
My best guess would be to weigh Apple, how much do you think it compares to a software company, a car manufacturer, a luxury good manufacturer (and maybe a few others) and then take those industries' average P/Es and weigh them accordingly to come up with what Apple's average P/E should be.
Comments
Wall Street is betting that Apple has no future but I'm rather curious about what consumer computer/tech company Wall Street claims does have a future. Dell? H-P? Acer? Lenovo? They all appear to be falling by the wayside and yet Wall Street is still betting against Apple's future. It doesn't make a bit of sense to me. Does Wall Street really believe that Microsoft and partners are going to easily rise again to strike Apple down? I think Apple will continue to make it harder for individual companies to go against them and still be profitable. Apple can easily afford to grab up all components in advance so that the competition is left with table scraps.
Apple continues to open more stores, sell more products, reap higher revenues and profits in a weak economy and yet the share value continues to fall. How can one company be running that strongly and still can't manage to hold ground in value? Wall Street's tossing away the value of fundamentals is absolutely criminal. As was mentioned earlier, Wall Street seems to operate like some Las Vegas casino. What's also puzzling is when Steve Jobs was alive, there was his health and succession plans holding Apple shares down. Now that Steve Jobs is dead, the doubt of future innovation without Steve Jobs is holding Apple shares down. It appears to be an unsolvable no-win situation for Apple investors. As an Apple long shareholder, I've pretty much given up hope of Apple getting any respect from Wall Street no matter how much revenue Apple earns.
Sound like someone has margined his apple shares and is getting nervous.
It doesn't look like they are.
It's really simple. You don't buy a stock based on what it did in the past or even what it did today. You buy a stock for its future performance.
It's quite obvious that the market doesn't have much faith in Apple without Jobs, and the underwhelming launch of the iPhone 4S didn't help. And yes, I'm well aware of the spin of the fastest selling iPhone ever -- a complete miracle considering it went on sale in far more countries the first day than the iPhone 4 did.
The percentage growth rate AAPL has been on has been stunning, to be sure. But the low P/E indicates that the market, as a whole, thinks the ride is over and that kind of growth is not going to continue. Especially sans Jobs.
Statistically, AAPL is undervalued for its current earnings. No doubt. But I know a great many people who now won't touch AAPL stock.
I agree with you that you buy stock based on future performance. But doesn't past performance give a clue of future performance? Would you buy stock in a company that released quarter after quarter of sucky earnings? The only reason you would buy is if you were very sure the company would post a profit later on.
Apple was undervalued even when Jobs was alive. And the iPads that people are buying today are the same iPads that people were buying when Jobs was alive.
What I am about to say isn't new but its important to add...
The analysis of Apple's stock and valued perforance was, in this story, fantastic.
I would VERY much like to have the same author work equally as hard on analysing WHY Apple's stock is being "ignored".
Do some fear an Apple bubble? Or does Apple care at all? IF Apple continues to perform and out-perform as it has in the last 4 years, and IF their cash base continues to grow they could start buying back their shares, no? Then what?
I would like to know the WHY and HOW if this WHAT subject.
Thanks.
I was aware of much of this, but not all, and when stacked together this way, it is breathtaking. I don't like to engage in conspiracy theories, but I can't help but get the feeling that either somebody of institutional size wants into apple in a big way, or they are shorting and cheating. The phenomenon is undeniable.
The numbers do not lie. Parse away Zaky's glowing opinions all you want, his numbers don't lie. You can not argue the facts.
I agree with you that you buy stock based on future performance. But doesn't past performance give a clue of future performance? Would you buy stock in a company that released quarter after quarter of sucky earnings? The only reason you would buy is if you were very sure the company would post a profit later on.
Apple was undervalued even when Jobs was alive. And the iPads that people are buying today are the same iPads that people were buying when Jobs was alive.
Apple investors are waiting for the *next big thing*. All of the great revenue generators have already been released, and, therefore, blessed by the great Jobs while he was still alive. Stock price is about the future. Wall Street needs to see a great new iPad 3, a great new radically refreshed iPhone and the next sales growth generator......the new, non-hobby AppleTV.
The product pipeline has already been laid for the next 5 years, IMHO. Wall Street and investors need to see those future products and have them light the world on fire, like is expected of Apple, before they jump in head-first again. Until then, they'll only be getting their toes wet by very conservatively following Apple's sales revenue dollars (and margin) with their investment dollars....hence the current P/E compression.
My 2 cents.
EDIT: The stock has been undervalued ever since Wall Street had the prospect of Apple without Steve Jobs in the back of their mind, which has been fueled by the health rumor mill for many, many years......since the 'C' word was brought to light.
I agree the stock is completely undervalued, as the article points out again, and again, and again. And as anyone who is so inclined can see for themselves if they analyzed Apple's 10q/k's (tip of the hat to Andy for doing the extensive amount of legwork, though).
I'd be much more interested in a discussion of just WHY apple is so undervalued and why the CNBC-types are so useless (the story that iPod sales are slowing is a tragic miscarriage of journalism and the reporters / producers of that segment should be fired). So, why are they so bad? Why is the stock so undervalued?
Possibly the wall street guys still use windows and blackberrys.
All this said, still long AAPL, although I need to diversify.
What's this based upon? Most of the data is Apple w/ Jobs. And if you're counting medical leaves, AAPL has hit all-time highs in share price w/out Jobs as CEO, as in 2011.
Jobs was still alive for most of 2011. Now he isn't.
Troll much?
Idiot. Do you have an actual response to this person's claims, are you just trolling yourself, or do you believe that every opinion which runs counter to yours is a personal attack (in which case, please get over yourself) !!
Apple may be undervalued, but it looks like it's going to be more undervalued moving towards the new year. Nothing seems to be stopping Apple's continued share price drop. No matter how good a quarter Apple has, it's well assured that Apple's share price will not return to former levels. It's too late for that this year. Wall Street has already given Apple up for dead along with the late Steve Jobs.
Wall Street is betting that Apple has no future but I'm rather curious about what consumer computer/tech company Wall Street claims does have a future. Dell? H-P? Acer? Lenovo? They all appear to be falling by the wayside and yet Wall Street is still betting against Apple's future. It doesn't make a bit of sense to me. Does Wall Street really believe that Microsoft and partners are going to easily rise again to strike Apple down? I think Apple will continue to make it harder for individual companies to go against them and still be profitable. Apple can easily afford to grab up all components in advance so that the competition is left with table scraps.
Apple continues to open more stores, sell more products, reap higher revenues and profits in a weak economy and yet the share value continues to fall. How can one company be running that strongly and still can't manage to hold ground in value? Wall Street's tossing away the value of fundamentals is absolutely criminal. As was mentioned earlier, Wall Street seems to operate like some Las Vegas casino. What's also puzzling is when Steve Jobs was alive, there was his health and succession plans holding Apple shares down. Now that Steve Jobs is dead, the doubt of future innovation without Steve Jobs is holding Apple shares down. It appears to be an unsolvable no-win situation for Apple investors. As an Apple long shareholder, I've pretty much given up hope of Apple getting any respect from Wall Street no matter how much revenue Apple earns.
So....Apple is something Wall Street does not understand. They don't make widgets. Not in the traditional sense. By the time everybody figured out what kind of widget the iPod was, we had iPhone....before they figured out iPhone there was iPad, etc...Wall Street does not think with creativity, and can not understand the big picture with Apple and what they do for the lives of their customers, right?
Add to that the fact that Apple is notoriously close to the vest. Apple probably refuses to play Wall Street games, and I would not be surprised if Apple doesn't make time to hang in Wall Street nightclubs, bars and social circles, to be simplistic in my analogy. So Wall Street ignores Apple, because Apple won't come to their parties...?
Moreover, this article nicely shows why the concept of investing is dead. If the markets were investment driven by any calculation Apple's stock price would be significantly higher.
So what are you going to do about it other than "piss and moan". Seriously, all you whining sycophants can protest all you want, but welcome to reality. Yes, AAPL is hugely undervalued from a fundamental perspective and yes, that hurts as I am Long but I am not a little baby crying "Wah, Wah !!". This is the stock market - we are playing with adults in a large group who do not care about each of us individually. If they don't want to buy AAPL and that causes us pain, then so be it ... none of us were forced to "invest" in the share market, and all this crying about how unfairly we are being treated by some anonymous, amorphous large group of other people is neither helpful nor mature. Stock market = risks. Perform Due Dilligence, BUT understand this may not be enough - even people who can card count must lose a hand or two in the casino.
But if Apple doesn't pay dividends, what do sales and earnings have to do with stock price? Stockholders aren't getting a dime of that money.
They should be getting capital appreciation on the share price based upon increased sales and earnings etc. This was the whole point of the article - or do you just believe that every share which does not pay a dividend (there are more than a few) is worthless because of your erroneous belief that "stockholders aren't getting a dime of that money." ?
I was aware of much of this, but not all, and when stacked together this way, it is breathtaking. I don't like to engage in conspiracy theories, but I can't help but get the feeling that either somebody of institutional size wants into apple in a big way, or they are shorting and cheating. The phenomenon is undeniable.
The numbers do not lie. Parse away Zaky's glowing opinions all you want, his numbers don't lie. You can not argue the facts.
While I completely agree with Zaky's article (like you say, the numbers dont lie), there is no conspiracy. A conspiracy to keep the share price of a company of Apple's size down would have to be mind-blowingly widespread and huge, and would involve ridiculous sums of money.
I think it will be great if Andy goes into the Why's of Apple's low share price. My guesses are:
1) Apple's growth is greatly predicated on releasing one blockbuster product after another. Never before have we seen a company release as many blockbuster products as Apple has. The closest is probably Microsoft, with Windows and Office, but those 2 products have been around for decades. Apple has only in the last decade released OS X based macs, iPods, iPhones, iPads all of which are huge products monetarily. (Dont get me wrong. I am not saying other companies dont release new products. However, no one has been able to consistenly enter new market segments with products that are blockbusters financially. Even Google, which has released a ton of popular new products continues to rely on AdSense for nearly all its revenue). People just dont have a historical precedent to compare Apple to, which makes it harder for them to understand it.
2) No other company of Apple's size has grown as quickly as Apple has over the last couple of years. Again, lack of historical precedence means people find Apple hard to understand.
3) While their numbers tell one story, the numbers often seem fantastic. e.g., Despite the huge amounts of money the iPhone is making, and despite the fact that Apple takes in more than half the industry profits, the numbers clearly show there is still tons of room for Apple to grow. The smartphone market is stell far less than 50% of the entire cellphone market, and its reasonable to assume that in 5 years nearly every phone sold will be a smartphone. This means that even if Apple maintains its share, its iPhone numbers should nearly double. This almost sounds unbelievable.
So what are you going to do about it other than "piss and moan". Seriously, all you whining sycophants can protest all you want, but welcome to reality. Yes, AAPL is hugely undervalued from a fundamental perspective and yes, that hurts as I am Long but I am not a little baby crying "Wah, Wah !!". This is the stock market - we are playing with adults in a large group who do not care about each of us individually. If they don't want to buy AAPL and that causes us pain, then so be it ... none of us were forced to "invest" in the share market, and all this crying about how unfairly we are being treated by some anonymous, amorphous large group of other people is neither helpful nor mature. Stock market = risks. Perform Due Dilligence, BUT understand this may not be enough - even people who can card count must lose a hand or two in the casino.
Actually, no, this isnt the stock market. This is a forum that is discussing the stock market. I am not sure what you are whining about, because forums are designed for one thing, and one thing only?expressing your opinions.
Actually, no, this isnt the stock market. This is a forum that is discussing the stock market. I am not sure what you are whining about, because forums are designed for one thing, and one thing only…expressing your opinions.
Yes - this is a forum discussing the stock market, which is exactly my point - this is the stock market we are talking about (how could you not even get this ?), yet people are postulating about widespread institutional conspiracies and vendettas against AAPL and how everything is essentially just not fair (as though "fairness" was somehow promised to them when they entered the share market - I must have missed that part of the brochure or skipped that part of the tour). I'm whining about the whining on this forum (you would think the stock market is an investment vehicle designed for 6 year old girls from all the irrational venting thus far) and about the lack of reasonable discussion. As this is a forum, other people have the right to do this, and as a forum I have the right to complain about, and disagree with what they are saying. Pretty simple really !
Part of the problem is the Stock market has long since drifted from a place to invest money. Investing means contributing money to a company to help it grow and to benefit from that "investment" if the company does in fact grow. Now, however, with the concept of short selling (and all the off shoots of that) the stock market has become nothing more than legalized gambling. You short the stock if you are gambling the stock will go down. Those who short the stock have a build in incentive to drive the price of a stock down. That is not investing. Further, it directly hurts businesses to have forces purposely rooting for its stock to go down, in turn, hurting real investors. What really stinks is those who short stocks are allowed to borrow the stocks of those who are so called investing of the stocks to work against the investors to try and drive the price down.
Moreover, this article nicely shows why the concept of investing is dead. If the markets were investment driven by any calculation Apple's stock price would be significantly higher.
Frankly, your understanding of the stock market is wrong. The stock market is NOT a place to invest in companies to help them grow. Any investments you make in the secondary market (which is what nearly all transactions, excepting IPOs, which regular investors can nearly never get into) does NOT go to the company at all.
The secondary market exists to provide liquidity for investors. This helps a company grow indirectly by providing angle investors, venture capitalists, and entrpreneurs an exit strategy. A long time ago companies used to go public to raise funds for expansion, but this is rare now (and even rarer still in the Tech industry, where capital investments can easily be covered by a few VCs).
Once you recognize that the Secondary market (i.e. Stock exchanges) are not intended to grow a company, but rather to provide liquidity, you will recognize why short selling is essential.
(1) There is nothing wrong in selling short, because if someone sells a stock at a certain price because they think it will go down, that means there is someone on the other end who buys it at that price because they think it will go up. It is a fair exchange.
(2) Yes, there is a risk in people having an incentive in driving down the price of a stock. However, if there was no short selling, then there would ONLY be incentives for people to raise the price of a stock. No one would be talking about the negatives. People would ONLY be talking about the good stuff, making everything seem hunky dory, driving the stock price up, until reality was exposed and the bubble burst. Short sellers have an incentive to expose negative news too.
The real problem is that disclosure laws are too lax, easily circumvented, and hardly enforced. Which means people can get away with a whole lot of crap. In reality, it isnt too much negative news that is the problem in the stock exchange right now, but rather, the presence of too many cheerleaders that is a problem. The classic example is CNBC. They have a HUGE incentive to downplay negatives and only talk about how well the stock market is doing, hence blowing up bubbles even more (because stock markets going up means more people invest means more people watch CNBC). It has become less egregious since the downturn, because they were so awfully wrong, but the bias towards cheerleading and ignoring negatives still exist. (As an aside, Bloomberg is usually a better bet than CNBC, because their source of revenue is financial professionals themselves, and the news dept is not expected to make money. They focus a little more on reality than cheerleading because that is what their clients are paying them 2k a year for).
Yes - this is a forum discussing the stock market, which is exactly my point - this is the stock market we are talking about (how could you not even get this ?), yet people are postulating about widespread institutional conspiracies and vendettas against AAPL and how everything is essentially just not fair (as though "fairness" was somehow promised to them when they entered the share market - I must have missed that part of the brochure or skipped that part of the tour). I'm whining about the whining on this forum (you would think the stock market is an investment vehicle designed for 6 year old girls from all the irrational venting thus far) and about the lack of reasonable discussion. As this is a forum, other people have the right to do this, and as a forum I have the right to complain about, and disagree with what they are saying. Pretty simple really !
I misunderstood the spirit of your post. If you see my earlier/later posts, you will see we are largely in agreement on the conspiracy/fairness concepts.
I misunderstood the spirit of your post. If you see my earlier/later posts, you will see we are largely in agreement on the conspiracy/fairness concepts.
Yes - I got that we basically agree from your posts, and thank-you for clearing up some of the misconceptions many people here are harbouring under (re: short selling, company fund raising, malevolent institutions with a grudge against apple etc.)
As regards the substance of the article, I agree entirely, but it has been obvious for quite some time now that AAPL is an undervalued stock (ANY time you hear Value investors in total accord with Growth investors about a company's merits, you know something is likely awry). However, I do not think this necessarily means Apple won't continue to be undervalued by the stock market and over what time-frame ... no-one does. Therefore, I guess what I'm saying is that whilst the fundamentals state AAPL is wildly undervalued, unless other people start to agree with us and start buying large amounts of AAPL, maybe it ISN'T entirely "undervalued" per se - "eye of the beholder" and all that ...
As far as I can remember back, Apple always had an unusually low P/E. This is not a recent development. It's been like that before Jobs re-joined Apple.
Here are my 2 cents as to why:
P/Es are typically different for different industries. And average P/Es are best derived from comparing like companies.
Now with Apple, analysts always had a hard time comparing it to like companies.
What's a company like Apple?
Apple pretty much has been its own beast ever since its early days.
Apple has lots of intellectual property, but not a lot of real assets. A bit like Microsoft or Google one could argue.
Such companies can easily burst like a bubble, which is why they often have extreme (low or high) P/E ratios.
Yet with Microsoft and Google, both have dominant market positions guaranteeing them earnings for years to come.
Apple is perhaps more volatile. They depend on bringing out new hardware hits year after year. A bad streak of misfires could bring the bubble to burst.
With corporations slowly changing their ways, Microsoft is in a better position, they can have a bunch of misfires before it gets really bad for them.
Same for Google. They will be wealthy for as long as there is advertisement on the Internet.
Basically Apple cannot be compared to Microsoft nor Google as easily, so Apple's P/E won't correlate to theirs.
Yet Apple is not a typical hardware company either. Manufacturing changed, and nowadays Apple has no factories or other 'hard' assets. Inventory is low too.
So you cannot really compare it to let's say a car manufacturer (who would also typically create their own designs from A-Z).
Apple might also be compared to a luxury goods brand, something like an expensive designer clothes, spirits or watch manufacturer. Yet comparing those P/Es won't work either. People typically buy computers more often than really expensive watches, while much less often than clothes or spirits. How many designer clothes can you have in your wardrobe compared to mobile phones in your bag?
It's not comparable, which makes deriving of the correct P/E for Apple difficult.
And finally, Apple did almost go under in 1996/97 and I think this also still reflects on the current P/E. If luck changes and with no other Jobs around, the next time Apple could very well go under. That uncertainty is built into Apple ever since.
All these factors combined turn Apple into such a unique beast. So based on what should its average P/E be?
It's guesswork, really.
My best guess would be to weigh Apple, how much do you think it compares to a software company, a car manufacturer, a luxury good manufacturer (and maybe a few others) and then take those industries' average P/Es and weigh them accordingly to come up with what Apple's average P/E should be.
But that's still pretty rough...