So....Apple is something Wall Street does not understand.
I dont blame Wall Street for this. Lets face it. Who in the Tech world understands Apple? Nearly every rag you read pretty much derides Apple for making technically-inept products, and selling them to mindless followers, and teenage kids, whom they influence with their awesome marketing (ironically, the only part of their operations which is outsourced to a 3rd party).
The reality is (and I know it's not cool to commend Apple for anything) Apple is a very unique company. Until we have half a decade of MBA grads who entered the market after studying about Apple and its unique business models in their HBS Case Studies, Wall Street will not understand Apple.
And I have no hope of the Tech world ever understanding Apple (although Google's Larry Page seems the rare exception who is getting it).
Here's the thing about AAPL Stock, ALL rationale, technical, and logical signs say that this Stock, even above $400, is the best and "safest" buy in the Market. At the current levels, it's kind of a dream come true, and I for one am buying up more Shares little by little, as it falls more,.
I feel that any naysayers toward the Company and/or Stock, are basing it on more fear-related, emotional, and imaginations - be them potentially true or not. These naysayers can also be those who act in action as well as sentiment, being those who Sell the Stock. Now, obviously, the situation in Europe, etc. dragging the Stock down is far more rational than AAPL on its own going lower, in a healthy Market. Even then, I see it as a buying opportunity, timing the "bottom" is naturally the difficult part.
All signs point to up, with AAPL. The valuation is already pricing in slow forward growth, and the Company shows no signs of slowing down. The great "What If" exists, with the unfortunate absence of Mr. Jobs, however, it seems as if many people perceive Mr. Cook to be some sort of newcomer. It is justifiably perceived that he has been practically running the company for the past couple of years or so, during their most profitable and growing periods. Also, many who follow Apple closely feel that he is far more responsible for their current success and wealth than what he gets credited for, but that's another story.
Assuming that AAPL's P/E doesn't increase, which is really a worst-case scenario, considering the Market at least can slightly live with and truck-on with the Political/Economical situation playing tug-of-war with it, 2012 seems to be a poised for strength. New iPhone, new iPad, possible iTV, and reports indicate that Apple is spending far more money now then they did before, on "something/s", so perhaps new stuff in the pipeline. Even for those who fear the future without Jobs, the next couple of years should be on their respective paths regardless of whether he's with us or not.
Apple products are stronger than ever, and those who feel like the company has "peaked" because of its enormous wealth and success, are very mistaken. The iPhone has a VERY small market-share in the overall Mobile Phone market, not to mention, they didn't ship the most phones of all vendors last Quarter, proving that even the iPhone has a lot of room to grow. As well, additional provider contracts, etc. will just further the potential for growth. As well.. they are just starting to gain traction in other Markets, such as China, where demand for Apple is outrageous, and where they are very "new". With China's growth at the moment, and growth potential, Apple is a top company to capitalize on this. Therefore, even as perhaps the worlds wealthiest company, Apple has tons and tons of room for growth potential.
Which leaves it up to the mortals at the helm. I feel that Apple has done everything right, considering what they're working with, with Steve's two blows to the Company (and world), resigning, then unfortunately passing. Tim Cook is the best man for the job, and they are clearly working on keeping the team tight, and happy, and striving. The addition of Bob Iger to the Board is a great sign and step, as he will bring many things to the table, and was someone who also knew, and worked with Steve Jobs. Again, they're keeping it "tight knit" which is what is paramount to keeping Apple as Apple.
Shareholders have all this to base their judgements/valuations on, however, yes, the fearful art of "what if" does exist, and yes, anything can happen, but I feel that Apple is spelled out for you ("UP"), and anything in the other direction (in the near-long term, at least) would be a major unforseen and unpredictable event.
Shareholders also I feel underestimate the large cash pile, as this can be seen as "insurance" in a sense. Not to mention, AAPL the Stock is seemingly rarely acknowledged by the company. Any mutters to Wall Street by Cook could send the Stock up ("he knows we exist!"). In the case that the worst possible scenario occurred, Apple has plenty of untapped areas they can use to support the Stock, i.e: Splits (PLEASE! We would all benefit), Buybacks, Dividends, etc.
Of course, Market manipulation, sleazy analysts riling up their fans with talking points and shifting positions, and jumping on the worlds most headline-grabbing company whenever a glimmer of bad news pops up (almost always baseless) as it's the hot-thing to do for them (cough, Cramer, lost all respect for him.... cough), and the worst "invention" ever, Short Puts against a Stock, all push the AAPL Stock around as if it's completely controlled by them. The fact that Apple doesn't acknowledge AAPL gives sleazy Analysts and Shorters almost uncontested control.
I feel that all the logistics say that Apple is the best bet, and best buy in the Market, absolutely at these levels, and even past $400. Let's hope I'm/we're right!
Yes - I got that we basically agree from your posts, and thank-you for clearing up some of the misconceptions many people here are harbouring under (re: short selling, company fund raising, malevolent institutions with a grudge against apple etc.)
I dont think Andy Zaky would believe those either (esp. since he clearly seems to think a correction is coming). Like others have suggested, I would be interested in what he thinks are the causes. I have laid out some of my opinions about that (I would not go as far as to say they are correct?just ideas at the moment).
Out of curiosity, do you have any ideas as to why the market isn't pricing Apple "correctly" yet (assuming you think this is the case, which it seems from your earlier posts you do).
Shareholders also I feel underestimate the large cash pile, as this can be seen as "insurance" in a sense. Not to mention, AAPL the Stock is seemingly rarely acknowledged by the company. Any mutters to Wall Street by Cook could send the Stock up ("he knows we exist!"). In the case that the worst possible scenario occurred, Apple has plenty of untapped areas they can use to support the Stock, i.e: Splits (PLEASE! We would all benefit), Buybacks, Dividends, etc.
Honestly, I am not a huge fan of Splits/Buybacks etc. I think, in general, management has too many incentives to do them at the worst time possible, and only lead to double taxation.
That being said, it does seem to me that the lack of interest paid towards the stock by Apple is playing a role in dragging down the stock (not sure about the magnitude..it may only be having a few cents of effect, or maybe hurting the stock by double digit dollars). It might not hurt Apple to give it a try right now. OTOH, the ability to operate without considering the stock price has certainly played a large part in making Apple, Apple.
The only thing in the way of rocketing the stock is no dividends! It would probably be 1000$ by now if they gave dividends. But don't get me wrong. If they where more popular it would start building a buble for shure. Now you know that it's a good buy any day of the year!
It would make the stock more unstable and the speculative day traders would have a field day making lots of hype on rumors that arent true (they would make their rumors in purpose to making a fast profit)
The only ones that would benefit are short sight investors.
I dont think Andy Zaky would believe those either (esp. since he clearly seems to think a correction is coming). Like others have suggested, I would be interested in what he thinks are the causes. I have laid out some of my opinions about that (I would not go as far as to say they are correct…just ideas at the moment).
Out of curiosity, do you have any ideas as to why the market isn't pricing Apple "correctly" yet (assuming you think this is the case, which it seems from your earlier posts you do).
I was going to await that next article, because I don't have any answers or even rampant speculation, but it has been something I wondered after almost losing all of my stock in 2008 (I bought on Margin in 2007 - Eek !!).
The only things I think make any degree of sense are the loss of Steve Jobs - at least in 2008, but that's not as applicable now with the longish "handover" of duties and even greater solidity of earnings, cash reserves and product diversity (the P/E was low even when he was around and the pipeline for the next 5 years seems solid, so this can't really be it), the size of the company (this would be my best guess as to what OTHER people are worried about - though it seems clear there is still so much market share to take and enable strong growth prospects), the fact that there have ALWAYS been people willing to "short" AAPL (not sure why - but they have lost a LOT of money thus far - well apart from 2008).
Maybe a combination between the loss of Steve Jobs and the PERCEPTION of greater competition (Android and the new Amazon tablets), though these are different products, aimed at different markets really (especially the Amazon product), in conjunction with most pundits not understanding this ? The increased level of patent claims, litigation, potential injunctions ? As we all know Apple doesn't innovate, we just steal ideas from Samsung and HTC ...
In short (sorry to "short" something here), I have no idea why Apple is so undervalued, though I suspect all of the things above play some part in the equation, I don't believe any or all of them provide a satisfactory explanation.
PS - One other thing is that being a High Beta consumer stock, any HINT of a recession is going to affect the stock (2008 and now), however the stock was probably undervalued even when it was at $420, and when the whole Euro situation didn't seem quite as dire and immediate as it does today.
I know it will be shocking for many of you, but although they undoubtedly differ on many points (which I am sure readers will point out in reply to this post), the closest company of Apple I can think of is ... Samsung, in the sense that they both do not care about stock exchange & financial people judgment, whiich ( on the condition they wisely use this freedom, of course) give them a precious indemendence ...
I know it will be shocking for many of you, but although they undoubtedly differ on many points (which I am sure readers will point out in reply to this post), the closest company of Apple I can think of is ... Samsung, in the sense that they both do not care about stock exchange & financial people judgment, whiich ( on the condition they wisely use this freedom, of course) give them a precious indemendence ...
Actually I would think more of Berkshire Hathaway (not that Buffett is anti-sharemarket or shareholders by any stretch of the imagination). I know when discussing not doing share splits or paying a dividend, Steve Jobs used to bring up Buffett/Berkshire as an example he followed somewhat.
Andy Zaky is a graduate from the UCLA School of Law, an AppleInsider contributor and the founder and author of Bullish Cross -- an online publication that provides in-depth analysis of Apple's financial health.
Quote:
Originally Posted by frugality
Someone should check how much Apple stock this Zaky guy owns, and what his vested interests are in this...
i'm with frugality on this one. what are the holdings of the author? and why does the original article mention that they're a holder, when the article as posted in the comments says just the above? edit?
and how about the timing? what would this article have read like just five weeks ago, when aapl was trading in the mid 420s?
i'd like to see an in-depth analysis by someone who doesn't have money at stake in the game. cuz i'll guarantee you, zaky is in it for the money.
Honestly, I am not a huge fan of Splits/Buybacks etc. I think, in general, management has too many incentives to do them at the worst time possible, and only lead to double taxation.
That being said, it does seem to me that the lack of interest paid towards the stock by Apple is playing a role in dragging down the stock (not sure about the magnitude..it may only be having a few cents of effect, or maybe hurting the stock by double digit dollars). It might not hurt Apple to give it a try right now. OTOH, the ability to operate without considering the stock price has certainly played a large part in making Apple, Apple.
Very much agreed. It was part of how Steve Jobs made Apple, "Apple", kind of like the punk-rocker amongst a group of suit and tie adult-contemporary musicians, who makes more money than all of them whilst flipping them the bird.... And people question why Apple is so "cool" to people?
My theory is that if Tim Cook decides to play the Wall Street Game, and "hang out at the Clubs", per-se, then in the short term, this will be extremely beneficial to the Stock. I think that if he made a peep in a direction clearly aimed to drive the price up, the players will rally. However, in the long term, THAT is what could make Apple "Just another company". Wall Street will suck you dry if you let them. I like Apple's game-plan, BUT, I wouldn't mind a taste of acknowledgement by the new CEO and team at this time, enough to support the Stock, and enough to give an ominous voice against anyone who'd "dare" naysay against Apple. However, it's really a fine line.
I do feel that Apple has more tools to put to use were they under the impression that they needed to rally the Stock up, than about any company out there. Untapped areas, a company that doesn't acknowledge its own Stock or Wall Street, etc.
On another subject, Apple guided uncharacteristically high this Quarter. A good idea? Hopefully! I took their word for it, and decided not to listen to the "Analysts" this time, so if what they're saying is true, even under a VERY conservative P/E and Stock valuation, following the Companies own earnings should put nice profits into Investors who got sucked into buying at the Highs, just before earnings, expecting the usual giant jump in Share price.
If they miss their own estimates, the Stock will get punished once again, however, regardless, the Quarter will be a phenomenal blowout, and people will try and pin it on Cook's perceived "Newbie-ness", when in actuality, they guided shortly after Jobs' passing, and I believe that Cook probably had little to do (in terms of any uncharacteristic behavior) with the Guidance this quarter.
One thing that I haven't seen mentioned here, is how Apple's last quarter "miss" was a 110% proving point as to how much Analysts salivate at the Apple headline. Apple shattered their own expectations, which is ALL that matters. Also, they had the perfect and justifiable excuse: Widely known new iPhone on the way. And guess what? As AAPL's shares got punished for a falsified "miss", they were reporting record breaking numbers on the new iPhone. To me, this spells: Buying Opportunity for the Savvy (obvious, really) Investor. Again, hopefully I'm right.
Had AAPL not been mis-reported and mishandled after the previous Earnings Call, the Share would have hit over $450 (it was trading higher than $427 I believe) easily, and would have continued after, as the Market rallied. $500 would have been in sight by the end of the year, of course, Political situations would have perhaps had their way with that, however.
Again, I feel that all "obvious's" point toward AAPL being currently at a level where Investors will slap themselves for not taking advantage of it in the near future. What dragged the Stock down, before the Europe "World is ending" headlines resurfaced with a vengeance, was baseless and humoring iPad "Cuts" rumors, same thing that happens evveery Quarter, and is usually disproven, and those who bought on the dips, usually benefit.
Now, the day before those rumors, AAPL finally started gaining its traction back, and the falsified "miss" of earnings seemed to be getting shaken off, as the Stock rallied, and closed just below $410. Then, ironically, some "source-less", baseless rumors float around, and [Explicit] like Jim Cramer do 180's on words supportive words they stated just a couple weeks before (nothing changed!)?
As well, after "the fall", Apple has showed decent resistance to the Markets fall, however, inevitably got sucked in. It even rallied on one of the days where the Market tanked as a whole. I feel that the "perception" of AAPL tanking is overblown, as they went down for a couple of days on some (baseless/rumored/falsified) "bad news", which is par for the course for AAPL, but then the general Market hit the fan, plunging AAPL with it, making it "appear" as if the Stock is on a spiral, when it's just following the pack. I feel that when the Market rebounds, AAPL will do so at a much higher rate, as the value will become paramount. If not in the near term, then we have Q1 coming up, and a plethora of new products next year. In the near-long term, I think it's spelled out for us.
The reason why is we have a global economy and the stock market these days have very little do to with a single companies earning. It seems everyday there is some bad news about he economy and the market drops like a rock taking Apple and many other companies along with it.
Very little connection with a companies' health. Only with how eager banks will be willing to lend you money. Problem is: Apple doesn't quite need the banks so much as the others.
The "markets" are basically computer programs that anticipate stuff on the basis of what other computer programs might do. Hence the knee-jerk reactions that aren't based on any well-thought-out reasoning (think: understanding of how Apple ticks). I remember well, when Apple was still using PPC processors, its stock tanked together with the others on the news that there was a bug in the Intel mathematical coprocessor. Based on a good understanding of the situation, its stock should have gone up accordingly, instead.
Very little connection with a companies' health. Only with how eager banks will be willing to lend you money. Problem is: Apple doesn't quite need the banks so much as the others.
The "markets" are basically computer programs that anticipate stuff on the basis of what other computer programs might do. Hence the knee-jerk reactions that aren't based on any well-thought-out reasoning (think: understanding of how Apple ticks). I remember well, when Apple was still using PPC processors, its stock tanked together with the others on the news that there was a bug in the Intel mathematical coprocessor. Based on a good understanding of the situation, its stock should have gone up accordingly, instead.
Well said. We have a fear based, scaredy-cat Market. This is a Stock manipulators dream (Search a Video of "Jim Cramer Stock Manipulation" to see just how easy it is), as they can direct the Market based on the same tired rumors we've been seeing for the past year it seems, "Europe this/that", etc. No facts, all "Fear/Hope", either of those words will Bear or Bull the Market.
Me personally, I told myself I'm not gonna live in the headlines. Naturally, any remotely decent Investor/Trader will account for them, understand what's going on, etc., however, recently more than ever, it has been proven that there's no rationale there. One month it rallies on the same subject that sends it tanking the next, then rally, etc. etc.
I don't understand what correlation AAPL has to Greece or any of that stuff, and it's looking like a "fixed Market" in how things go up and down together, as if individual Companies don't make a difference......... IN A MARKET THAT IN ITS PUREST ESSENCE AND NATURE REVOLVES ONLY AROUND COMPANIES! NOT POLITICS!.
i'm with frugality on this one. what are the holdings of the author? and why does the original article mention that they're a holder, when the article as posted in the comments says just the above? edit?
and how about the timing? what would this article have read like just five weeks ago, when aapl was trading in the mid 420s?
i'd like to see an in-depth analysis by someone who doesn't have money at stake in the game. cuz i'll guarantee you, zaky is in it for the money.
That's BS. Having AAPL Shares doesn't discredit ones opinion, namely when they're stating facts and logistics. In fact, it backs up their claims as they're putting their money where their mouths are.
There's a difference between corrupt hyperbole and logical arguments for something you believe in/are invested in.
If the share price doesn't go up, in another few years AAPL will have accumulated more earnings per share than its stock price. That is, it will have accumulated $400 billion in cash and other assets. The stock price is obviously going to start going up before that happens, so it's just a question of when. It could be soon. So I wouldn't be so sure the stock will keep going down with the market.
Not so. I bought all my Apple shares in 1996 when Steve Jobs joined the board. At the time I am pretty sure they had more cash in the bank than their market capitalisation. I still have all those shares and hope to retire on them!
It's unfortunate that no one but the British will properly parse the sarcasm pasted all over this article. Without a doubt the best AI article I've read in a long time.
Complete agree. Greatest article I've seen as well.
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.
It's only a matter of time before Apple releases a product and everyone goes - meh. It nearly happened with the iPad and I waited nearly a year to buy one. It's just the law of averages. Past performance is a good indicator but the future is unknown.
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?
A few thoughts:
1. In terms of trailing p/e, it's actually not too terribly undervalued compared to other tech stocks -- everybody is being hit right now.
2. In terms of profit growth, they are very undervalued
3. Apple is in uncharted territory. No company this large has ever grown so fast. This means that every econometric prediction model out there is going to say that apple's profits simply cannot continue to grow this fast.
4. People who believe that apple's stock will continue to grow may be under-capitalized (I know I am!)
5. CNBC is totally irrelevant, except perhaps for short term (as in hours) stock manipulation. CNBC is just money-porn. Its a way for little people to feel big. Totally pathetic.
Actually I would think more of Berkshire Hathaway (not that Buffett is anti-sharemarket or shareholders by any stretch of the imagination). I know when discussing not doing share splits or paying a dividend, Steve Jobs used to bring up Buffett/Berkshire as an example he followed somewhat.
Interesting comment, thanks.
But for them (Apple and Samsung) , no matter how sales, profit, etc .. can be big, this is a secondary issue.
The only issue is worldwide domination.
This will be a facinating Kurosawa-type samourais fight to the death, where unprepared, untrained or weak players will be cut into tiny bits (as it is already the case).
There will be blood, for sure, a lot of blood (and Stock Exchange likes this). I do not think it will be Apple's one ...
Comments
So....Apple is something Wall Street does not understand.
I dont blame Wall Street for this. Lets face it. Who in the Tech world understands Apple? Nearly every rag you read pretty much derides Apple for making technically-inept products, and selling them to mindless followers, and teenage kids, whom they influence with their awesome marketing (ironically, the only part of their operations which is outsourced to a 3rd party).
The reality is (and I know it's not cool to commend Apple for anything) Apple is a very unique company. Until we have half a decade of MBA grads who entered the market after studying about Apple and its unique business models in their HBS Case Studies, Wall Street will not understand Apple.
And I have no hope of the Tech world ever understanding Apple (although Google's Larry Page seems the rare exception who is getting it).
Here's the thing about AAPL Stock, ALL rationale, technical, and logical signs say that this Stock, even above $400, is the best and "safest" buy in the Market. At the current levels, it's kind of a dream come true, and I for one am buying up more Shares little by little, as it falls more,.
I feel that any naysayers toward the Company and/or Stock, are basing it on more fear-related, emotional, and imaginations - be them potentially true or not. These naysayers can also be those who act in action as well as sentiment, being those who Sell the Stock. Now, obviously, the situation in Europe, etc. dragging the Stock down is far more rational than AAPL on its own going lower, in a healthy Market. Even then, I see it as a buying opportunity, timing the "bottom" is naturally the difficult part.
All signs point to up, with AAPL. The valuation is already pricing in slow forward growth, and the Company shows no signs of slowing down. The great "What If" exists, with the unfortunate absence of Mr. Jobs, however, it seems as if many people perceive Mr. Cook to be some sort of newcomer. It is justifiably perceived that he has been practically running the company for the past couple of years or so, during their most profitable and growing periods. Also, many who follow Apple closely feel that he is far more responsible for their current success and wealth than what he gets credited for, but that's another story.
Assuming that AAPL's P/E doesn't increase, which is really a worst-case scenario, considering the Market at least can slightly live with and truck-on with the Political/Economical situation playing tug-of-war with it, 2012 seems to be a poised for strength. New iPhone, new iPad, possible iTV, and reports indicate that Apple is spending far more money now then they did before, on "something/s", so perhaps new stuff in the pipeline. Even for those who fear the future without Jobs, the next couple of years should be on their respective paths regardless of whether he's with us or not.
Apple products are stronger than ever, and those who feel like the company has "peaked" because of its enormous wealth and success, are very mistaken. The iPhone has a VERY small market-share in the overall Mobile Phone market, not to mention, they didn't ship the most phones of all vendors last Quarter, proving that even the iPhone has a lot of room to grow. As well, additional provider contracts, etc. will just further the potential for growth. As well.. they are just starting to gain traction in other Markets, such as China, where demand for Apple is outrageous, and where they are very "new". With China's growth at the moment, and growth potential, Apple is a top company to capitalize on this. Therefore, even as perhaps the worlds wealthiest company, Apple has tons and tons of room for growth potential.
Which leaves it up to the mortals at the helm. I feel that Apple has done everything right, considering what they're working with, with Steve's two blows to the Company (and world), resigning, then unfortunately passing. Tim Cook is the best man for the job, and they are clearly working on keeping the team tight, and happy, and striving. The addition of Bob Iger to the Board is a great sign and step, as he will bring many things to the table, and was someone who also knew, and worked with Steve Jobs. Again, they're keeping it "tight knit" which is what is paramount to keeping Apple as Apple.
Shareholders have all this to base their judgements/valuations on, however, yes, the fearful art of "what if" does exist, and yes, anything can happen, but I feel that Apple is spelled out for you ("UP"), and anything in the other direction (in the near-long term, at least) would be a major unforseen and unpredictable event.
Shareholders also I feel underestimate the large cash pile, as this can be seen as "insurance" in a sense. Not to mention, AAPL the Stock is seemingly rarely acknowledged by the company. Any mutters to Wall Street by Cook could send the Stock up ("he knows we exist!"). In the case that the worst possible scenario occurred, Apple has plenty of untapped areas they can use to support the Stock, i.e: Splits (PLEASE! We would all benefit), Buybacks, Dividends, etc.
Of course, Market manipulation, sleazy analysts riling up their fans with talking points and shifting positions, and jumping on the worlds most headline-grabbing company whenever a glimmer of bad news pops up (almost always baseless) as it's the hot-thing to do for them (cough, Cramer, lost all respect for him.... cough), and the worst "invention" ever, Short Puts against a Stock, all push the AAPL Stock around as if it's completely controlled by them. The fact that Apple doesn't acknowledge AAPL gives sleazy Analysts and Shorters almost uncontested control.
I feel that all the logistics say that Apple is the best bet, and best buy in the Market, absolutely at these levels, and even past $400. Let's hope I'm/we're right!
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.)
I dont think Andy Zaky would believe those either (esp. since he clearly seems to think a correction is coming). Like others have suggested, I would be interested in what he thinks are the causes. I have laid out some of my opinions about that (I would not go as far as to say they are correct?just ideas at the moment).
Out of curiosity, do you have any ideas as to why the market isn't pricing Apple "correctly" yet (assuming you think this is the case, which it seems from your earlier posts you do).
Shareholders also I feel underestimate the large cash pile, as this can be seen as "insurance" in a sense. Not to mention, AAPL the Stock is seemingly rarely acknowledged by the company. Any mutters to Wall Street by Cook could send the Stock up ("he knows we exist!"). In the case that the worst possible scenario occurred, Apple has plenty of untapped areas they can use to support the Stock, i.e: Splits (PLEASE! We would all benefit), Buybacks, Dividends, etc.
Honestly, I am not a huge fan of Splits/Buybacks etc. I think, in general, management has too many incentives to do them at the worst time possible, and only lead to double taxation.
That being said, it does seem to me that the lack of interest paid towards the stock by Apple is playing a role in dragging down the stock (not sure about the magnitude..it may only be having a few cents of effect, or maybe hurting the stock by double digit dollars). It might not hurt Apple to give it a try right now. OTOH, the ability to operate without considering the stock price has certainly played a large part in making Apple, Apple.
<snip>
Farnkly that was one of the best attempts at explaining Apple's "low" P/E anywhere on the internets. Kudos.
It would make the stock more unstable and the speculative day traders would have a field day making lots of hype on rumors that arent true (they would make their rumors in purpose to making a fast profit)
The only ones that would benefit are short sight investors.
I dont think Andy Zaky would believe those either (esp. since he clearly seems to think a correction is coming). Like others have suggested, I would be interested in what he thinks are the causes. I have laid out some of my opinions about that (I would not go as far as to say they are correct…just ideas at the moment).
Out of curiosity, do you have any ideas as to why the market isn't pricing Apple "correctly" yet (assuming you think this is the case, which it seems from your earlier posts you do).
I was going to await that next article, because I don't have any answers or even rampant speculation, but it has been something I wondered after almost losing all of my stock in 2008 (I bought on Margin in 2007 - Eek !!).
The only things I think make any degree of sense are the loss of Steve Jobs - at least in 2008, but that's not as applicable now with the longish "handover" of duties and even greater solidity of earnings, cash reserves and product diversity (the P/E was low even when he was around and the pipeline for the next 5 years seems solid, so this can't really be it), the size of the company (this would be my best guess as to what OTHER people are worried about - though it seems clear there is still so much market share to take and enable strong growth prospects), the fact that there have ALWAYS been people willing to "short" AAPL (not sure why - but they have lost a LOT of money thus far - well apart from 2008).
Maybe a combination between the loss of Steve Jobs and the PERCEPTION of greater competition (Android and the new Amazon tablets), though these are different products, aimed at different markets really (especially the Amazon product), in conjunction with most pundits not understanding this ? The increased level of patent claims, litigation, potential injunctions ? As we all know Apple doesn't innovate, we just steal ideas from Samsung and HTC
In short (sorry to "short" something here), I have no idea why Apple is so undervalued, though I suspect all of the things above play some part in the equation, I don't believe any or all of them provide a satisfactory explanation.
PS - One other thing is that being a High Beta consumer stock, any HINT of a recession is going to affect the stock (2008 and now), however the stock was probably undervalued even when it was at $420, and when the whole Euro situation didn't seem quite as dire and immediate as it does today.
I know it will be shocking for many of you, but although they undoubtedly differ on many points (which I am sure readers will point out in reply to this post), the closest company of Apple I can think of is ... Samsung, in the sense that they both do not care about stock exchange & financial people judgment, whiich ( on the condition they wisely use this freedom, of course) give them a precious indemendence ...
Actually I would think more of Berkshire Hathaway (not that Buffett is anti-sharemarket or shareholders by any stretch of the imagination). I know when discussing not doing share splits or paying a dividend, Steve Jobs used to bring up Buffett/Berkshire as an example he followed somewhat.
Wow.....amazing what you get here on these interwebs....financial advice on a Apple fanboy site...
Someone should check how much Apple stock this Zaky guy owns, and what his vested interests are in this...
Really, you don't have to worry about us "fanboy", we know what to to with our money. You could get a life, if that is still not too late.
Andy Zaky is a graduate from the UCLA School of Law, an AppleInsider contributor and the founder and author of Bullish Cross -- an online publication that provides in-depth analysis of Apple's financial health.
Someone should check how much Apple stock this Zaky guy owns, and what his vested interests are in this...
i'm with frugality on this one. what are the holdings of the author? and why does the original article mention that they're a holder, when the article as posted in the comments says just the above? edit?
and how about the timing? what would this article have read like just five weeks ago, when aapl was trading in the mid 420s?
i'd like to see an in-depth analysis by someone who doesn't have money at stake in the game. cuz i'll guarantee you, zaky is in it for the money.
Honestly, I am not a huge fan of Splits/Buybacks etc. I think, in general, management has too many incentives to do them at the worst time possible, and only lead to double taxation.
That being said, it does seem to me that the lack of interest paid towards the stock by Apple is playing a role in dragging down the stock (not sure about the magnitude..it may only be having a few cents of effect, or maybe hurting the stock by double digit dollars). It might not hurt Apple to give it a try right now. OTOH, the ability to operate without considering the stock price has certainly played a large part in making Apple, Apple.
Very much agreed. It was part of how Steve Jobs made Apple, "Apple", kind of like the punk-rocker amongst a group of suit and tie adult-contemporary musicians, who makes more money than all of them whilst flipping them the bird.... And people question why Apple is so "cool" to people?
My theory is that if Tim Cook decides to play the Wall Street Game, and "hang out at the Clubs", per-se, then in the short term, this will be extremely beneficial to the Stock. I think that if he made a peep in a direction clearly aimed to drive the price up, the players will rally. However, in the long term, THAT is what could make Apple "Just another company". Wall Street will suck you dry if you let them. I like Apple's game-plan, BUT, I wouldn't mind a taste of acknowledgement by the new CEO and team at this time, enough to support the Stock, and enough to give an ominous voice against anyone who'd "dare" naysay against Apple. However, it's really a fine line.
I do feel that Apple has more tools to put to use were they under the impression that they needed to rally the Stock up, than about any company out there. Untapped areas, a company that doesn't acknowledge its own Stock or Wall Street, etc.
On another subject, Apple guided uncharacteristically high this Quarter. A good idea? Hopefully! I took their word for it, and decided not to listen to the "Analysts" this time, so if what they're saying is true, even under a VERY conservative P/E and Stock valuation, following the Companies own earnings should put nice profits into Investors who got sucked into buying at the Highs, just before earnings, expecting the usual giant jump in Share price.
If they miss their own estimates, the Stock will get punished once again, however, regardless, the Quarter will be a phenomenal blowout, and people will try and pin it on Cook's perceived "Newbie-ness", when in actuality, they guided shortly after Jobs' passing, and I believe that Cook probably had little to do (in terms of any uncharacteristic behavior) with the Guidance this quarter.
One thing that I haven't seen mentioned here, is how Apple's last quarter "miss" was a 110% proving point as to how much Analysts salivate at the Apple headline. Apple shattered their own expectations, which is ALL that matters. Also, they had the perfect and justifiable excuse: Widely known new iPhone on the way. And guess what? As AAPL's shares got punished for a falsified "miss", they were reporting record breaking numbers on the new iPhone. To me, this spells: Buying Opportunity for the Savvy (obvious, really) Investor. Again, hopefully I'm right.
Had AAPL not been mis-reported and mishandled after the previous Earnings Call, the Share would have hit over $450 (it was trading higher than $427 I believe) easily, and would have continued after, as the Market rallied. $500 would have been in sight by the end of the year, of course, Political situations would have perhaps had their way with that, however.
Again, I feel that all "obvious's" point toward AAPL being currently at a level where Investors will slap themselves for not taking advantage of it in the near future. What dragged the Stock down, before the Europe "World is ending" headlines resurfaced with a vengeance, was baseless and humoring iPad "Cuts" rumors, same thing that happens evveery Quarter, and is usually disproven, and those who bought on the dips, usually benefit.
Now, the day before those rumors, AAPL finally started gaining its traction back, and the falsified "miss" of earnings seemed to be getting shaken off, as the Stock rallied, and closed just below $410. Then, ironically, some "source-less", baseless rumors float around, and [Explicit] like Jim Cramer do 180's on words supportive words they stated just a couple weeks before (nothing changed!)?
As well, after "the fall", Apple has showed decent resistance to the Markets fall, however, inevitably got sucked in. It even rallied on one of the days where the Market tanked as a whole. I feel that the "perception" of AAPL tanking is overblown, as they went down for a couple of days on some (baseless/rumored/falsified) "bad news", which is par for the course for AAPL, but then the general Market hit the fan, plunging AAPL with it, making it "appear" as if the Stock is on a spiral, when it's just following the pack. I feel that when the Market rebounds, AAPL will do so at a much higher rate, as the value will become paramount. If not in the near term, then we have Q1 coming up, and a plethora of new products next year. In the near-long term, I think it's spelled out for us.
The reason why is we have a global economy and the stock market these days have very little do to with a single companies earning. It seems everyday there is some bad news about he economy and the market drops like a rock taking Apple and many other companies along with it.
Very little connection with a companies' health. Only with how eager banks will be willing to lend you money. Problem is: Apple doesn't quite need the banks so much as the others.
The "markets" are basically computer programs that anticipate stuff on the basis of what other computer programs might do. Hence the knee-jerk reactions that aren't based on any well-thought-out reasoning (think: understanding of how Apple ticks). I remember well, when Apple was still using PPC processors, its stock tanked together with the others on the news that there was a bug in the Intel mathematical coprocessor. Based on a good understanding of the situation, its stock should have gone up accordingly, instead.
Very little connection with a companies' health. Only with how eager banks will be willing to lend you money. Problem is: Apple doesn't quite need the banks so much as the others.
The "markets" are basically computer programs that anticipate stuff on the basis of what other computer programs might do. Hence the knee-jerk reactions that aren't based on any well-thought-out reasoning (think: understanding of how Apple ticks). I remember well, when Apple was still using PPC processors, its stock tanked together with the others on the news that there was a bug in the Intel mathematical coprocessor. Based on a good understanding of the situation, its stock should have gone up accordingly, instead.
Well said. We have a fear based, scaredy-cat Market. This is a Stock manipulators dream (Search a Video of "Jim Cramer Stock Manipulation" to see just how easy it is), as they can direct the Market based on the same tired rumors we've been seeing for the past year it seems, "Europe this/that", etc. No facts, all "Fear/Hope", either of those words will Bear or Bull the Market.
Me personally, I told myself I'm not gonna live in the headlines. Naturally, any remotely decent Investor/Trader will account for them, understand what's going on, etc., however, recently more than ever, it has been proven that there's no rationale there. One month it rallies on the same subject that sends it tanking the next, then rally, etc. etc.
I don't understand what correlation AAPL has to Greece or any of that stuff, and it's looking like a "fixed Market" in how things go up and down together, as if individual Companies don't make a difference......... IN A MARKET THAT IN ITS PUREST ESSENCE AND NATURE REVOLVES ONLY AROUND COMPANIES! NOT POLITICS!.
i'm with frugality on this one. what are the holdings of the author? and why does the original article mention that they're a holder, when the article as posted in the comments says just the above? edit?
and how about the timing? what would this article have read like just five weeks ago, when aapl was trading in the mid 420s?
i'd like to see an in-depth analysis by someone who doesn't have money at stake in the game. cuz i'll guarantee you, zaky is in it for the money.
That's BS. Having AAPL Shares doesn't discredit ones opinion, namely when they're stating facts and logistics. In fact, it backs up their claims as they're putting their money where their mouths are.
There's a difference between corrupt hyperbole and logical arguments for something you believe in/are invested in.
If the share price doesn't go up, in another few years AAPL will have accumulated more earnings per share than its stock price. That is, it will have accumulated $400 billion in cash and other assets. The stock price is obviously going to start going up before that happens, so it's just a question of when. It could be soon. So I wouldn't be so sure the stock will keep going down with the market.
Not so. I bought all my Apple shares in 1996 when Steve Jobs joined the board. At the time I am pretty sure they had more cash in the bank than their market capitalisation. I still have all those shares and hope to retire on them!
It's unfortunate that no one but the British will properly parse the sarcasm pasted all over this article. Without a doubt the best AI article I've read in a long time.
Complete agree. Greatest article I've seen as well.
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.
It's only a matter of time before Apple releases a product and everyone goes - meh. It nearly happened with the iPad and I waited nearly a year to buy one. It's just the law of averages. Past performance is a good indicator but the future is unknown.
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?
A few thoughts:
1. In terms of trailing p/e, it's actually not too terribly undervalued compared to other tech stocks -- everybody is being hit right now.
2. In terms of profit growth, they are very undervalued
3. Apple is in uncharted territory. No company this large has ever grown so fast. This means that every econometric prediction model out there is going to say that apple's profits simply cannot continue to grow this fast.
4. People who believe that apple's stock will continue to grow may be under-capitalized (I know I am!)
5. CNBC is totally irrelevant, except perhaps for short term (as in hours) stock manipulation. CNBC is just money-porn. Its a way for little people to feel big. Totally pathetic.
Actually I would think more of Berkshire Hathaway (not that Buffett is anti-sharemarket or shareholders by any stretch of the imagination). I know when discussing not doing share splits or paying a dividend, Steve Jobs used to bring up Buffett/Berkshire as an example he followed somewhat.
Interesting comment, thanks.
But for them (Apple and Samsung) , no matter how sales, profit, etc .. can be big, this is a secondary issue.
The only issue is worldwide domination.
This will be a facinating Kurosawa-type samourais fight to the death, where unprepared, untrained or weak players will be cut into tiny bits (as it is already the case).
There will be blood, for sure, a lot of blood (and Stock Exchange likes this). I do not think it will be Apple's one ...