The lack of alternative products for grow means that a very few products have too be leveraged for all of that growth.
Too few products that are in too dominant a position?
Well, take the Macintosh for one. 15% of Apple's revenue (about $6B this quarter, ~$30B for the 2012) and only 5% of the world market. Lots of room for growth. Growing a steady double digits when rest of the the industry is stalled. If you include the iPad as a computer (and the president of HP does) then next year Apple will be largest manufacturer of computers in the world. Together they will sell about $70B. And STILL with only 5% of the market (NIC iPad).
AND Apple has...
The highest quality computers by far
The broadest product line-up
The best and newest technologies
Incredible retail outlets
The best service in the industry, by far
Benefiting from the halo effect of other Apple products
The most respected brand
TONS of room for growth
It would be crazy to think that this single sector (computers) could not double or better by 2014, to $140B+. Bigger by far than Apple is this year. With just one segment of the business.
I think I just put a big hole in your arguement. No?
Just wanted to clarify, when we talk about the US manufacturing sector being first or second in the world, we are talking about the value of the products produced, not the number of people employed.
Ahh... Thanks for that (see my last post).
I think that that's the a big part of the US's problem -- oversimplifying here:
Big US $ contracts foreign manufacturers to make products that are sold to others for big $
That's great for us, the shareholders.
I am a firm believer in the free market -- but where is the place in the US for a worker to start with an entry job or choose a career?
We can aspire to, but cannot all start as Industry moguls with $ Billions at our disposal.
I think that that's the a big part of the US's problem -- oversimplifying here:
Big US $ contracts foreign manufacturers to make products that are sold to others for big $
That's great for us, the shareholders.
I am a firm believer in the free market -- but where is the place in the US for a worker to start with an entry job or choose a career?
We can aspire to, but cannot all start as Industry moguls with $ Billions at our disposal.
Agree. Not sure that the quoted $1.82T of US manufacturing subtracts OEM parts sourced overseas, but I would certainly hope so. GIGO otherwise.
A manufacturing job used to be the best road to a middle class life in the USA. It helped create stable communities and families. I now reside in Detroit (my heart is still in Cambridge). Since 1970 80% of the manufacturing jobs (and the families and their homes) have vanished here.
Very sad. I don't know what replaces it. Certainly not a job at WallMart.
Too few products that are in too dominant a position?
It would be crazy to think that this single sector (computers) could not double or better by 2014, to $140B+. Bigger by far than Apple is this year. With just one segment of the business.
I think I just put a big hole in your arguement. No?
I agree that the few number of products is an advantage for Apple -- SJ-101 Discard Legacy Baggage At The Earliest Opportunity. This gives Apple an agility to take advantage (risks) when opportunities appear.
The last thing, I think, is Apple people are continuously looking around for things that irritate them or piss them off. Then they analyze "what can I do to this to make my (and everyone else's) life better?"
This is an inexhaustible source of opportunities for Apple -- it is what they do better than anyone.
Ask yourself... Who is going to obsolete the post-pc Tablet computer... You already know the answer -- and Apple is already working on it!
I keep wondering if a large stock split, say, 10 for 1 would help. I realize that the total valuation remains the same... but it could change the number and profile of the shareholders.
As it is, I think the concentration of the shares allows a very few institutions to wield an inordinate influence on the share price.
There's probably some truth to that. Institutions hold a large fraction of Apple's stock and private individuals tend to stay away from very expensive shares. If Apple split 10:1, it MIGHT lead to more private investors, although it's tough to be sure - and even tougher to quantify.
However, if they did that, imagine all the trolls here going nuts. "Apple used to be at 360 and now it's only at $40. What a failure......"
Quote:
Originally Posted by anantksundaram
Neither viewpoint is correct.
In terms of worldwide share of computers and phones, Apple is still quite small. So is the aggregate sales of tablets, since the market for that is barely getting going. There's potentially tremendous room for growth in all of its major segments.
Also, even if Apple (a la MSFT) were to just do sideways from here, say, simply growing at the long-run rate of inflation -- which Apple could, sleep-walking -- it would still command a higher multiple if you compared it to other similar assets.
That's the point that often gets missed. Even if Apple wasn't growing at all (or if you completely discount future growth), it's share price is still far too low.
Just bought some puts on Amazon, though. Any bad news is going to hammer their stock pretty hard.
Just bought some puts on Amazon, though. Any bad news is going to hammer their stock pretty hard.
I agree totally about Amazon: the valuation is fairly ridiculous, and I can see nothing in their future growth opportunities that suggests anything radically different or game-changing.
I wish I had the risk tolerance to deal with puts. Even though your prediction is right and I think you're going to make out well.
[*]Large companies are targets for lawyers. This drains money from a company like Apple. More importantly they will eventually loose a lawsuit that will cost them money. [*]There seems to be a rather vocal crowd right now that sees success as some how evil. Apple doubling in size so that it is clearly the largest company in the world just gives these idiots something to focus on. [*]In a very similar manner some in the political world see big companies as a "thing" to exercise their political power against. You will see people in politics attacking Apple simple because it is a big successful company. This is no different than what has happened to Exxon, IBM, Microsoft, AT&T and other companies over the years.
Lawyers, undefined 'vocal crowds', and 'people in politics' are not a threat to Apple. Do you see any organized groups that represent any of these constituencies arming themselves against the company? If so, who? Where?
And, if there aren't any, you do realize that your suggestion in tantamount to saying that Apple must self-censor its growth. In other words, you think Apple will one day stop growing because of some threats (as yet undefined), and if that threat were not there now, it could be there tomorrow, so they should go ahead and stop growing anyway?
Quote:
Originally Posted by wizard69
[*]Sheer size brings with it difficulties with respect to growth. Some of the factories in China employ more people than entire states have population wise in the USA. Doubling production is a huge capital investment and requires finding skilled workers. Yes Apple has lots of cash but they are not magicians and can not wave a wand to get instantly functional production facilities.
Yes, managing quality and the supply chain could be an issue at this scale, especially if one has to double capacity.
But this is where Tim Cook's background and experience could be a huge asset. By all accounts, he is a master supply chain manager, and brings tremendous skills in building operational excellence. These sorts of things have been scaled before. No one would have predicted five years ago that we would see assembly shop the size of today's Foxconn, employing one million people. Yet, it has happened.
Why is it impossible to imagine a Foxconn facility with two million employees? Or, say, another Foxconn-type company with a million employees? Also, don't forget that Apple's gains in share will come partly at the expense of others in the industry losing share, freeing up both human and physical capital, and creating slack in the supply chain.
Quote:
Originally Posted by wizard69
[*]Apple has way to much invested in production in China which leaves them exposed in several ways. For one there is a backlash in the US against Chinese products. More significantly though is that China is becoming very aggressive militarily which could lead to war or tight sanctions against China. It is the old story about having all of your eggs in one basket.
In today's global economy, nobody -- least of all, the US -- can afford to go to war with China, and China cannot afford to go to war with anyone. If that were to happen, it's not just Apple that will shut down. So will hundreds of other companies all over the US and the world, including the Dells, the HPs, the GEs, the Walmarts, the Targets, hundreds of Chinese companies, and so forth. Half the shelves in this country would be bare. In fact, Apple will be the least of our problems if something like that were to happen!
You are simply making alarmist predictions.
Moreover, Apple has already begun to diversify out of China, e.g., look at their move into Brazil. They could yet move to Mexico, or even back to the US.
I could go on similarly about your other points, but hope you get the drift. Companies don't plan their future based on worst-case scenarios. If they did, no one would invest, and if they did not invest, they would not grow. Most human beings have a more optimistic (and less bleak) view of the world than you do. And, thank goodness for that.
Just as the bearish sentiment in Apple hits a cyclical peak, the company is about to deliver the the biggest earnings blowout in the history of the world.
We're talking about the mother of all earnings blowouts. Well maybe not that big, but certainly the largest blowout in company history without question.
The difference between wealth and poverty on Wall Street is determined by ignoring the fluff, respecting the details and using reason to tease out the bottom-line reality generally overlooked by the masses. While everyone focuses on whether the passing of Steve Jobs marks the end of Apple, or whether the Amazon Kindle Fire will kill the iPad, the company is quietly selling millions upon millions of iPhones that far exceed even the most rosy expectations.
The most valuable company in America is about to grow its earnings by a whopping 84 percent this quarter, and Wall Street is asleep at the wheel. Apple's trailing twelve months of earnings is going to skyrocket from $27.68 to at least $33.00 which will finally drive Apple's P/E ratio down into the 11′s. While fund managers continue to debate whether they should buy Amazon (AMZN) at a 95 P/E ratio or Google at 22 P/E ratio, Apple will have reported more in revenue in one quarter than each of these companies reported all last year.
Bullish Cross Research expects Apple to report $11.75 in EPS on $42 billion in revenue in fiscal Q1, which compares to the Wall Street consensus estimates of $9.79 in EPS on $38 billion in revenue. The Bullish Cross outlook, if proven accurate, will amount to Apple reporting the largest revenue and earnings blowout in the history of the company. The table below outlines the Bullish Cross Fiscal Q1 2012 Earning Forecast for Apple Inc. and includes a very specific breakdown in our revenue expectations:
We expect this blowout to be largely driven by Wall Street underestimating the power of the iPhone side of the force. That will be the story this quarter. We expect Apple to conservatively report that it shipped 32-40 million iPhones far ahead of the 25 million iPhones that Wall Street expects out of the company. That will be the largest gap between Wall Street expectations and actual results since the iPhone was first introduced in 2007.
Yet, not only do we believe that Apple will comfortably ship 32 million iPhones without a hitch, we think our expectations will actually prove too conservative. In fact, we believe that Apple will actually end up reporting sales of more than 35 million iPhones which will cause the heart attack of at least several hundred short sellers. It will be a total deer-in-head-lights type earnings blowout where people just stand there and say "WTF" repeatedly while slowing doing the defeated head-shake ? CNBC contributor Steve Cortez will be among their number with his admitted Apple short position.
While we think Apple will basically more or less report in-line on iPads, iPods and Macs, iPhone sales will redefine everything Wall Street thought they knew about the company. The minute this report hits the street, the cyclical Apple bear will be shot point blank in the head. You're going to see the sentiment shift from ultra-bearish to ultra-bullish in mere seconds. We've seen it happen before and we're about to see it happen again in fiscal Q1. So the bears have about 3-4 more weeks to live. Enjoy it while it lasts.
Now it is important to understand that investors should view the Bullish Cross "official" outlook this quarter as being merely the lower boundary of what one should reasonably expect Apple to report. While we think there's a significant chance that Apple will end up reporting $11.75 in EPS on $42 billion in revenue, we still believe that there's a much higher likelihood that Apple will report a quarter that is more in-line with the outlook presented by my colleague at Asymco, Horace Dediu. Horace Dediu is one of the best analysts out there, is one of the leading experts on the global smart-phone market, and is a testament to his Alma Mater, the Harvard Business School.
Dediu has put together an expectation that is very much in-line with the Bullish Cross "high-point" forecast for Apple. Our "high-point" forecast is an expectation we put out every quarter that takes into account the possibility that Apple could deliver a perfect quarter. Notice that Apple has delivered a report that was in-line or slightly above the Bullish Cross high-point estimate twice in the past two years. Once in fiscal Q2 2010 and again in fiscal Q3 2011. Both times it resulted in Apple gapping up uncontrollably after being unhalted in after-hours. The table below outlines the Bullish Cross High-Point Outlook:
This expectation outlined by Dediu, if proven accurate, will result in an unimaginable blowout of epic proportions. We're talking about a top-line beat of nearly $7 billion with iPhone sales blowing out estimates by over 10.7 million units or nearly 50 percent. The most Apple has beaten the consensus on iPhones in any previous quarter has been by only a few million units or about 20 percent. That's at the high end. Here we're talking something completely unseen before on Wall Street. Missing iPhone units by 50 percent will force the street to go back to the drawing board and re-evaluate everything they thought they knew about the company.
The Dediu outlook is calling for Apple to report $12.30 in EPS on $44.6 billion in revenue on the back of sales of 35.7 million iPhones, 14.7 million iPads and 5.2 million Macs. Dediu is expecting iPhone sales to grow 120 percent leading to a 91 percent increase in earnings per share.
If this outlook by Dediu comes to pass, it will lead to the biggest gap-up in the history of the company. In fact, I think such a report will lead to at least a 10 percent gap-up in the stock if not more. What I would expect to see is Apple halted at least 10 minutes before the results are released and once Apple resumes trading, we should see the stock $50.00 higher. If Apple is trading around $400 when it reports its results, it will gap-up to $450. If it's trading at around $430 a share when it repots, it will test $500 that week.
This is a once in a decade type earnings reaction that we've seen happen a few times with Google. Haven't really seen that type of an earnings reaction out of Apple yet. And that's mostly because Apple typically runs into the results.
Moreover, Apple tends to almost always sell-off after reporting earnings in fiscal Q1 as the stock tends to rally significantly between September and January. Here, Apple has been trading sideways since July. So there hasn't been much of a run-up in the stock price.
Thus, the type of reaction that we will get this quarter will largely depend on the type of pre-earnings run-up we see in the stock. If the bearish sentiment and trading action continues up until the day Apple reports earnings and we get a Horace Dediu blowout, Apple's going up $50.00.
Again, this type of a blowout expected by Dediu is a once in a decade type earnings blowout and we'll observe a corresponding once in a decade type response in the stock price. Yet it is important remember that Dediu is presenting what is the equivalent of our high-point outlook. If everything goes perfectly, we will see his expectations come to fruition.
But if the Bullish Cross "official" outlook is to be viewed as the lower boundary, then the Horace Dediu outlook forms the upper boundary. You should expect Apple to report between those two outlooks. And when it does, it will be a record blowout regardless. Our lower boundary is already calling for a record revenue and earnings blowout out of Apple.
For those who are interested in the events and reasons leading up to this eventual blowout, we basically explain how it came to this in two articles entitled, Why Apple's Guidance is Still Conservative and How to Properly use Apple's Guidance to Accurately Forecast Earnings.
Andy M. Zaky is a fund manager at Bullish Cross Capital and the editor of the Bullish Cross Financial Newsletter. Bullish Cross Capital owns a significant long position in Apple, Inc.
A blowout is a disaster, right? You know, when you go on a date and your date blows you out as in blows you out of the water as in explodes and sinks? That has been how the term blowout has been used in English since ships shot cannon at each other and used explosive shells that sometimes hit the gunpowder store and literally blew the boat out of the water.
Please remember not many other countries talk like you.
Dividends are one of those things that sounds better on paper than in reality. For a utility, they make a lot of sense. For a rapidly growing market leader? Not so much.
One of AAPL's true problems is there is almost nobody left to buy. If they add a dividend then funds that hold dividend stocks can now buy AAPL. I am not a 'dividend guy' myself but in the case of AAPL a modest dividend would help the stock price.
I personally think a modest share buyback is in order right now.
One of AAPL's true problems is there is almost nobody left to buy. If they add a dividend then funds that hold dividend stocks can now buy AAPL. I am not a 'dividend guy' myself but in the case of AAPL a modest dividend would help the stock price.
I personally think a modest share buyback is in order right now.
The "true problem" lies not with AAPL but with the market. Apple deserves a much higher valuation. But I don't think Apple needs to play the game that other CEOs make of trying to massage the investor community through gimmicks such as dividends and stock buybacks. And yes, I call them gimmicks. As I see it, when a company begins to pay dividends or do stock buybacks, management could be saying one or both of the following: (a) We have a lot of confidence in our earnings and to show that, we're going to regularly pay a portion of our profits to shareholders; (b) We don't see any other ways of investing our profits in the business so we're just going to give it back to shareholders. Companies want to give the impression that the main reason they're paying dividends is because of reason (a) indicated previously but oftentimes, it's reason (b).
Apple should concentrate on what they do best-design and sell great products. If investors think AAPL isn't worth their money, let them invest in something else.
Warren Buffett owns Berkshire-Hathaway. In the 1990s, Berkshire stock was trading in the thousands of dollars. It's now trading at over $100,000. Berkshire stock has never split and Warren gave a reason for it. He wanted investors in Berkshire to be partners, not speculators. He wanted investors to commit to Berkshire for the long term. Very reluctantly, he created another class of Berkshire stock but that too is not day-trader material. He split the new class of Berkshire stock only to finance an acquisition, but he firmly believes that Berkshire Hathaway shareholders should be like partners, not speculators.
As a public company, Apple has to play the game of satisfying Wall Street. But they should not go to the extent of pandering to Wall Street at the expense of their business. It hasn't paid to bet against Apple. Let those who bet against Apple find out the hard way.
My response directly below touches upon this but a truly huge Apple might as well change its logo from a apple to a bullseye. In any event some points below.
Large companies are targets for lawyers. This drains money from a company like Apple. More importantly they will eventually loose a lawsuit that will cost them money.
There seems to be a rather vocal crowd right now that sees success as some how evil. Apple doubling in size so that it is clearly the largest company in the world just gives these idiots something to focus on.
In a very similar manner some in the political world see big companies as a "thing" to exercise their political power against. You will see people in politics attacking Apple simple because it is a big successful company. This is no different than what has happened to Exxon, IBM, Microsoft, AT&T and other companies over the years.
Sheer size brings with it difficulties with respect to growth. Some of the factories in China employ more people than entire states have population wise in the USA. Doubling production is a huge capital investment and requires finding skilled workers. Yes Apple has lots of cash but they are not magicians and can not wave a wand to get instantly functional production facilities.
As alluded to above the political climate against success is a problem. Apple could very well end up paying far more in taxes. This could be a huge issue if excessively sever.
Apple has way to much invested in production in China which leaves them exposed in several ways. For one there is a backlash in the US against Chinese products. More significantly though is that China is becoming very aggressive militarily which could lead to war or tight sanctions against China. It is the old story about having all of your eggs in one basket.
Apple is product thin in its two biggest growth areas. This being iPhone and iPad. Though I believe they will address this with more products soon, relying on a one size fits all strategy is a mistake when you are talking about billions of customers. Ultimately this means leaving an opening for competition that they should close themselves. Studies have shown that to much choice chases away customers but I suspect that the converse also happens, that is to little choice drives customers away. Apple hasn't demonstrated the aggressive product development needed to drive sales further.
These are just a few issues but if Apple wants to double sales they need to obviously increase production. In some cases they are already fully employing all of a contractors facilities so doubling production might mean investing in another processor factory with Samsung for example. They have the billions to do so but it isn't a shake and bake dinner. It is interesting that Apple has been rumored to be looking at production at TSMC with people taking this as a freeze in relations with Samsung. I rather see it as a prudent measure because they had a real possibility of outstripping Samsungs production capacity.
This is just one example of Apple having struggles that are a result of their sheer size. A small company that wants to double production often just buys a new machine and sticks it in a corner. To double A6 production they may have to build an entire factory. Which brings up another question, I wonder how much ownership Apple has in Samsungs new factory in Austin. I know a few years ago Samsung was looking for partners, it makes me wonder how much Apple owns of the operation.
Wow! Really?
This is the most pessimistic, fear mongering, weak minded, intangible, non rationale "argument" I've ever seen.
Problem right now is that AAPL supporters have nothing but logic, facts, statistics, and rationale to back up their investments while AAPL detractors have nothing but fear mongering, "bring the big guy down 'cause I ain't getting anything from him" hyperbole to fall back on. Problem is, both influence the Stock movement, but rationale will prevail. When AAPL was worth $50 Bill, they said "no way can they grow to $100 Bill", when it was 100, they said the same thing about 200, etc., etc., etc., etc.
APPLE/AAPL is in a transitional period, i.e there's a microscope on them, lots of pessimistic "click bait" to try and scare people. The company itself is incredibly growing and strengthening, nothing near hinting any signs any "pullback", however strong logistics saying the opposite. The Stock is priced as if Apple is going on hiatus for several years. Let Apple be Apple, and let the cobwebs fly off the Stock and watch greasy Wall Streeters have no choice but to stop the old game of "how can we put fear around AAPL".
Apple's Execs just had sizable Stock grants sent their way, and this is a capable team who will push for the worlds HEALTHIEST, richest, and most successful company to continue as it always has. Nobody likes working hard to lose money, and despite what fear-mongerers might have you believe, with every source that claims "competition" as some sort of end for Apple, as if they're forced to close their glass doors, Apple's team are a capable bunch who won't "sit back and let it happen". Disney CEO and new Apple Board Member, Bob Iger, just bought over $1 Million worth of AAPL Stock at $375-ish. Maybe he has a good hunch about Apple's future?
Wall Street is treating Apple as an aberration. Where every company were lapping up to Wall Street's guidance and wisdom, Apple is the only odd man out. Apple prospered and the companies that followed Wall Street's wisdom have to pay the piper and lost their shirts off their backs. And boy, Wall Street really hates Apple. Apple not only beats Wall Street, but it also rubs Wall Street in the nose. Apple is the rare company on Wall Street that has zero debt. That means Wall Street banks do not earn a single cent from Apple for fat fees and consultancy fees.
Wall Street has not only destroyed many companies but it has also destroyed the economies of the Western world. Yet they were powerful enough to get bail-out money from the bureaucrats at public expense. Except for Bernard Madoff who suckered many of the smart people from Wall Street to invest in his Ponzi schemes (HSBC and Citibank are some of the greedy victims) I have not heard of anyone from the rogue banks being jailed. The same people are still running the show with the same behavior.
As for the careerist Wall Street analysts, they have time and time again screwed up and always missed out on Apple. It is because they are beholden to Wall Street and so do not dare to go against the sacrosanct Wall Street's orthodoxy. They will be punished if they do. For more detail on this part, please download and listen to the podcast titled "Exile on Wall Street" on WYNC's Leonard Lopate Show from the iTunes Podcast store. Wall Street analyst Mike Mayo, who worked at six Wall Street firms, analyzing banks and protesting against bad practices for two decades, discusses the role of finance and banks in the US. In Exile on Wall Street: One Analysts Fight to Save Wall Street.
Wall Street is treating Apple as an aberration. Where every company were lapping up to Wall Street's guidance and wisdom, Apple is the only odd man out. Apple prospered and the companies that followed Wall Street's wisdom have to pay the piper and lost their shirts off their backs. And boy, Wall Street really hates Apple.... SNIP...
Blah blah blah blah. We all are looking for a target to shoot at for messing up Apple's performance. I've finally come to realize that it is Apple's very strength as a company that makes it possible for options traders to control it so much. Here's an article I read on Seeking Alpha that begins to explain what's going on with Apple. As best I can kluge my way through it, the hedge funds control it about 80% of the time, except when there is big news/earnings, then the open market comes through. The p/e will remain compressed for some time before the price breaks through to another plateau. Understand, they can't do this with an inherently weak stock like Amazon. It's neither good nor bad, it simply is.
I wish for a 10-1 split, it would be neutral to the stock price, yet be a strong psychological factor to get more people in the stock, and just maybe bring the valuation up a bit.
However, back in the day, remember when Microsoft stock split and split and split, to the point where if you had owned a single share from the early days you could retire a millionaire on it? Apple has far surpassed them. It should be the stock for this generation, yet due to the very sophistication of the market it is not. Sheesh, if it were valued freely, like an Amazon, it would be worth 3,000 a share!!!! I've read that the price would have to rise to $467 just to keep the current p/e ratio after earnings are reported for this quarter!
Ohhh, for the love of Pete I wish the stock were worth that much. It should rise $100 every year with no problems, but I wish there were a way to get the real valuation of the company in the share price to sell it, so that it isn't necessary to option the stock just to get any return from it. I don't want to be an options trader and I don't want to wait years and years either.
Comments
Very well stated! +1
Totally disagree. Sounds like a used car salesman ramblings. No real facts. Conjecture of what ifs and 'the sky is falling'.
OK... On even keel!
That link is interesting... It shows that "Office, Accounting & Computing Machinery"
Manufacturing is 53% in US vs 10% in China...
I find that impossible to believe. IBM may still manufacture [mostly] in the US but I can't think of any computer company doing manufacturing here.
(I worked for IBM for 16 1/2 years in maimframe Computer Market Support)
Is this output per person or gross output rankings?
The lack of alternative products for grow means that a very few products have too be leveraged for all of that growth.
Too few products that are in too dominant a position?
Well, take the Macintosh for one. 15% of Apple's revenue (about $6B this quarter, ~$30B for the 2012) and only 5% of the world market. Lots of room for growth. Growing a steady double digits when rest of the the industry is stalled. If you include the iPad as a computer (and the president of HP does) then next year Apple will be largest manufacturer of computers in the world. Together they will sell about $70B. And STILL with only 5% of the market (NIC iPad).
AND Apple has...
The highest quality computers by far
The broadest product line-up
The best and newest technologies
Incredible retail outlets
The best service in the industry, by far
Benefiting from the halo effect of other Apple products
The most respected brand
TONS of room for growth
It would be crazy to think that this single sector (computers) could not double or better by 2014, to $140B+. Bigger by far than Apple is this year. With just one segment of the business.
I think I just put a big hole in your arguement. No?
Just wanted to clarify, when we talk about the US manufacturing sector being first or second in the world, we are talking about the value of the products produced, not the number of people employed.
Ahh... Thanks for that (see my last post).
I think that that's the a big part of the US's problem -- oversimplifying here:
Big US $ contracts foreign manufacturers to make products that are sold to others for big $
That's great for us, the shareholders.
I am a firm believer in the free market -- but where is the place in the US for a worker to start with an entry job or choose a career?
We can aspire to, but cannot all start as Industry moguls with $ Billions at our disposal.
Ahh... Thanks for that (see my last post).
I think that that's the a big part of the US's problem -- oversimplifying here:
Big US $ contracts foreign manufacturers to make products that are sold to others for big $
That's great for us, the shareholders.
I am a firm believer in the free market -- but where is the place in the US for a worker to start with an entry job or choose a career?
We can aspire to, but cannot all start as Industry moguls with $ Billions at our disposal.
Agree. Not sure that the quoted $1.82T of US manufacturing subtracts OEM parts sourced overseas, but I would certainly hope so. GIGO otherwise.
A manufacturing job used to be the best road to a middle class life in the USA. It helped create stable communities and families. I now reside in Detroit (my heart is still in Cambridge). Since 1970 80% of the manufacturing jobs (and the families and their homes) have vanished here.
Very sad. I don't know what replaces it. Certainly not a job at WallMart.
Too few products that are in too dominant a position?
It would be crazy to think that this single sector (computers) could not double or better by 2014, to $140B+. Bigger by far than Apple is this year. With just one segment of the business.
I think I just put a big hole in your arguement. No?
I agree that the few number of products is an advantage for Apple -- SJ-101 Discard Legacy Baggage At The Earliest Opportunity. This gives Apple an agility to take advantage (risks) when opportunities appear.
The last thing, I think, is Apple people are continuously looking around for things that irritate them or piss them off. Then they analyze "what can I do to this to make my (and everyone else's) life better?"
This is an inexhaustible source of opportunities for Apple -- it is what they do better than anyone.
Ask yourself... Who is going to obsolete the post-pc Tablet computer... You already know the answer -- and Apple is already working on it!
I keep wondering if a large stock split, say, 10 for 1 would help. I realize that the total valuation remains the same... but it could change the number and profile of the shareholders.
As it is, I think the concentration of the shares allows a very few institutions to wield an inordinate influence on the share price.
There's probably some truth to that. Institutions hold a large fraction of Apple's stock and private individuals tend to stay away from very expensive shares. If Apple split 10:1, it MIGHT lead to more private investors, although it's tough to be sure - and even tougher to quantify.
However, if they did that, imagine all the trolls here going nuts. "Apple used to be at 360 and now it's only at $40. What a failure......"
Neither viewpoint is correct.
In terms of worldwide share of computers and phones, Apple is still quite small. So is the aggregate sales of tablets, since the market for that is barely getting going. There's potentially tremendous room for growth in all of its major segments.
Also, even if Apple (a la MSFT) were to just do sideways from here, say, simply growing at the long-run rate of inflation -- which Apple could, sleep-walking -- it would still command a higher multiple if you compared it to other similar assets.
That's the point that often gets missed. Even if Apple wasn't growing at all (or if you completely discount future growth), it's share price is still far too low.
Just bought some puts on Amazon, though. Any bad news is going to hammer their stock pretty hard.
Just bought some puts on Amazon, though. Any bad news is going to hammer their stock pretty hard.
I agree totally about Amazon: the valuation is fairly ridiculous, and I can see nothing in their future growth opportunities that suggests anything radically different or game-changing.
I wish I had the risk tolerance to deal with puts. Even though your prediction is right and I think you're going to make out well.
[*]Large companies are targets for lawyers. This drains money from a company like Apple. More importantly they will eventually loose a lawsuit that will cost them money. [*]There seems to be a rather vocal crowd right now that sees success as some how evil. Apple doubling in size so that it is clearly the largest company in the world just gives these idiots something to focus on. [*]In a very similar manner some in the political world see big companies as a "thing" to exercise their political power against. You will see people in politics attacking Apple simple because it is a big successful company. This is no different than what has happened to Exxon, IBM, Microsoft, AT&T and other companies over the years.
Lawyers, undefined 'vocal crowds', and 'people in politics' are not a threat to Apple. Do you see any organized groups that represent any of these constituencies arming themselves against the company? If so, who? Where?
And, if there aren't any, you do realize that your suggestion in tantamount to saying that Apple must self-censor its growth. In other words, you think Apple will one day stop growing because of some threats (as yet undefined), and if that threat were not there now, it could be there tomorrow, so they should go ahead and stop growing anyway?
[*]Sheer size brings with it difficulties with respect to growth. Some of the factories in China employ more people than entire states have population wise in the USA. Doubling production is a huge capital investment and requires finding skilled workers. Yes Apple has lots of cash but they are not magicians and can not wave a wand to get instantly functional production facilities.
Yes, managing quality and the supply chain could be an issue at this scale, especially if one has to double capacity.
But this is where Tim Cook's background and experience could be a huge asset. By all accounts, he is a master supply chain manager, and brings tremendous skills in building operational excellence. These sorts of things have been scaled before. No one would have predicted five years ago that we would see assembly shop the size of today's Foxconn, employing one million people. Yet, it has happened.
Why is it impossible to imagine a Foxconn facility with two million employees? Or, say, another Foxconn-type company with a million employees? Also, don't forget that Apple's gains in share will come partly at the expense of others in the industry losing share, freeing up both human and physical capital, and creating slack in the supply chain.
[*]Apple has way to much invested in production in China which leaves them exposed in several ways. For one there is a backlash in the US against Chinese products. More significantly though is that China is becoming very aggressive militarily which could lead to war or tight sanctions against China. It is the old story about having all of your eggs in one basket.
In today's global economy, nobody -- least of all, the US -- can afford to go to war with China, and China cannot afford to go to war with anyone. If that were to happen, it's not just Apple that will shut down. So will hundreds of other companies all over the US and the world, including the Dells, the HPs, the GEs, the Walmarts, the Targets, hundreds of Chinese companies, and so forth. Half the shelves in this country would be bare. In fact, Apple will be the least of our problems if something like that were to happen!
You are simply making alarmist predictions.
Moreover, Apple has already begun to diversify out of China, e.g., look at their move into Brazil. They could yet move to Mexico, or even back to the US.
I could go on similarly about your other points, but hope you get the drift. Companies don't plan their future based on worst-case scenarios. If they did, no one would invest, and if they did not invest, they would not grow. Most human beings have a more optimistic (and less bleak) view of the world than you do. And, thank goodness for that.
Just as the bearish sentiment in Apple hits a cyclical peak, the company is about to deliver the the biggest earnings blowout in the history of the world.
We're talking about the mother of all earnings blowouts. Well maybe not that big, but certainly the largest blowout in company history without question.
The difference between wealth and poverty on Wall Street is determined by ignoring the fluff, respecting the details and using reason to tease out the bottom-line reality generally overlooked by the masses. While everyone focuses on whether the passing of Steve Jobs marks the end of Apple, or whether the Amazon Kindle Fire will kill the iPad, the company is quietly selling millions upon millions of iPhones that far exceed even the most rosy expectations.
The most valuable company in America is about to grow its earnings by a whopping 84 percent this quarter, and Wall Street is asleep at the wheel. Apple's trailing twelve months of earnings is going to skyrocket from $27.68 to at least $33.00 which will finally drive Apple's P/E ratio down into the 11′s. While fund managers continue to debate whether they should buy Amazon (AMZN) at a 95 P/E ratio or Google at 22 P/E ratio, Apple will have reported more in revenue in one quarter than each of these companies reported all last year.
Bullish Cross Research expects Apple to report $11.75 in EPS on $42 billion in revenue in fiscal Q1, which compares to the Wall Street consensus estimates of $9.79 in EPS on $38 billion in revenue. The Bullish Cross outlook, if proven accurate, will amount to Apple reporting the largest revenue and earnings blowout in the history of the company. The table below outlines the Bullish Cross Fiscal Q1 2012 Earning Forecast for Apple Inc. and includes a very specific breakdown in our revenue expectations:
We expect this blowout to be largely driven by Wall Street underestimating the power of the iPhone side of the force. That will be the story this quarter. We expect Apple to conservatively report that it shipped 32-40 million iPhones far ahead of the 25 million iPhones that Wall Street expects out of the company. That will be the largest gap between Wall Street expectations and actual results since the iPhone was first introduced in 2007.
Yet, not only do we believe that Apple will comfortably ship 32 million iPhones without a hitch, we think our expectations will actually prove too conservative. In fact, we believe that Apple will actually end up reporting sales of more than 35 million iPhones which will cause the heart attack of at least several hundred short sellers. It will be a total deer-in-head-lights type earnings blowout where people just stand there and say "WTF" repeatedly while slowing doing the defeated head-shake ? CNBC contributor Steve Cortez will be among their number with his admitted Apple short position.
While we think Apple will basically more or less report in-line on iPads, iPods and Macs, iPhone sales will redefine everything Wall Street thought they knew about the company. The minute this report hits the street, the cyclical Apple bear will be shot point blank in the head. You're going to see the sentiment shift from ultra-bearish to ultra-bullish in mere seconds. We've seen it happen before and we're about to see it happen again in fiscal Q1. So the bears have about 3-4 more weeks to live. Enjoy it while it lasts.
Now it is important to understand that investors should view the Bullish Cross "official" outlook this quarter as being merely the lower boundary of what one should reasonably expect Apple to report. While we think there's a significant chance that Apple will end up reporting $11.75 in EPS on $42 billion in revenue, we still believe that there's a much higher likelihood that Apple will report a quarter that is more in-line with the outlook presented by my colleague at Asymco, Horace Dediu. Horace Dediu is one of the best analysts out there, is one of the leading experts on the global smart-phone market, and is a testament to his Alma Mater, the Harvard Business School.
Dediu has put together an expectation that is very much in-line with the Bullish Cross "high-point" forecast for Apple. Our "high-point" forecast is an expectation we put out every quarter that takes into account the possibility that Apple could deliver a perfect quarter. Notice that Apple has delivered a report that was in-line or slightly above the Bullish Cross high-point estimate twice in the past two years. Once in fiscal Q2 2010 and again in fiscal Q3 2011. Both times it resulted in Apple gapping up uncontrollably after being unhalted in after-hours. The table below outlines the Bullish Cross High-Point Outlook:
This expectation outlined by Dediu, if proven accurate, will result in an unimaginable blowout of epic proportions. We're talking about a top-line beat of nearly $7 billion with iPhone sales blowing out estimates by over 10.7 million units or nearly 50 percent. The most Apple has beaten the consensus on iPhones in any previous quarter has been by only a few million units or about 20 percent. That's at the high end. Here we're talking something completely unseen before on Wall Street. Missing iPhone units by 50 percent will force the street to go back to the drawing board and re-evaluate everything they thought they knew about the company.
The Dediu outlook is calling for Apple to report $12.30 in EPS on $44.6 billion in revenue on the back of sales of 35.7 million iPhones, 14.7 million iPads and 5.2 million Macs. Dediu is expecting iPhone sales to grow 120 percent leading to a 91 percent increase in earnings per share.
If this outlook by Dediu comes to pass, it will lead to the biggest gap-up in the history of the company. In fact, I think such a report will lead to at least a 10 percent gap-up in the stock if not more. What I would expect to see is Apple halted at least 10 minutes before the results are released and once Apple resumes trading, we should see the stock $50.00 higher. If Apple is trading around $400 when it reports its results, it will gap-up to $450. If it's trading at around $430 a share when it repots, it will test $500 that week.
This is a once in a decade type earnings reaction that we've seen happen a few times with Google. Haven't really seen that type of an earnings reaction out of Apple yet. And that's mostly because Apple typically runs into the results.
Moreover, Apple tends to almost always sell-off after reporting earnings in fiscal Q1 as the stock tends to rally significantly between September and January. Here, Apple has been trading sideways since July. So there hasn't been much of a run-up in the stock price.
Thus, the type of reaction that we will get this quarter will largely depend on the type of pre-earnings run-up we see in the stock. If the bearish sentiment and trading action continues up until the day Apple reports earnings and we get a Horace Dediu blowout, Apple's going up $50.00.
Again, this type of a blowout expected by Dediu is a once in a decade type earnings blowout and we'll observe a corresponding once in a decade type response in the stock price. Yet it is important remember that Dediu is presenting what is the equivalent of our high-point outlook. If everything goes perfectly, we will see his expectations come to fruition.
But if the Bullish Cross "official" outlook is to be viewed as the lower boundary, then the Horace Dediu outlook forms the upper boundary. You should expect Apple to report between those two outlooks. And when it does, it will be a record blowout regardless. Our lower boundary is already calling for a record revenue and earnings blowout out of Apple.
For those who are interested in the events and reasons leading up to this eventual blowout, we basically explain how it came to this in two articles entitled, Why Apple's Guidance is Still Conservative and How to Properly use Apple's Guidance to Accurately Forecast Earnings.
Andy M. Zaky is a fund manager at Bullish Cross Capital and the editor of the Bullish Cross Financial Newsletter. Bullish Cross Capital owns a significant long position in Apple, Inc.
[ View this article at AppleInsider.com ]
Please remember not many other countries talk like you.
Dividends are one of those things that sounds better on paper than in reality. For a utility, they make a lot of sense. For a rapidly growing market leader? Not so much.
One of AAPL's true problems is there is almost nobody left to buy. If they add a dividend then funds that hold dividend stocks can now buy AAPL. I am not a 'dividend guy' myself but in the case of AAPL a modest dividend would help the stock price.
I personally think a modest share buyback is in order right now.
One of AAPL's true problems is there is almost nobody left to buy. If they add a dividend then funds that hold dividend stocks can now buy AAPL. I am not a 'dividend guy' myself but in the case of AAPL a modest dividend would help the stock price.
I personally think a modest share buyback is in order right now.
The "true problem" lies not with AAPL but with the market. Apple deserves a much higher valuation. But I don't think Apple needs to play the game that other CEOs make of trying to massage the investor community through gimmicks such as dividends and stock buybacks. And yes, I call them gimmicks. As I see it, when a company begins to pay dividends or do stock buybacks, management could be saying one or both of the following: (a) We have a lot of confidence in our earnings and to show that, we're going to regularly pay a portion of our profits to shareholders; (b) We don't see any other ways of investing our profits in the business so we're just going to give it back to shareholders. Companies want to give the impression that the main reason they're paying dividends is because of reason (a) indicated previously but oftentimes, it's reason (b).
Apple should concentrate on what they do best-design and sell great products. If investors think AAPL isn't worth their money, let them invest in something else.
Warren Buffett owns Berkshire-Hathaway. In the 1990s, Berkshire stock was trading in the thousands of dollars. It's now trading at over $100,000. Berkshire stock has never split and Warren gave a reason for it. He wanted investors in Berkshire to be partners, not speculators. He wanted investors to commit to Berkshire for the long term. Very reluctantly, he created another class of Berkshire stock but that too is not day-trader material. He split the new class of Berkshire stock only to finance an acquisition, but he firmly believes that Berkshire Hathaway shareholders should be like partners, not speculators.
As a public company, Apple has to play the game of satisfying Wall Street. But they should not go to the extent of pandering to Wall Street at the expense of their business. It hasn't paid to bet against Apple. Let those who bet against Apple find out the hard way.
My response directly below touches upon this but a truly huge Apple might as well change its logo from a apple to a bullseye. In any event some points below.
- Large companies are targets for lawyers. This drains money from a company like Apple. More importantly they will eventually loose a lawsuit that will cost them money.
- There seems to be a rather vocal crowd right now that sees success as some how evil. Apple doubling in size so that it is clearly the largest company in the world just gives these idiots something to focus on.
- In a very similar manner some in the political world see big companies as a "thing" to exercise their political power against. You will see people in politics attacking Apple simple because it is a big successful company. This is no different than what has happened to Exxon, IBM, Microsoft, AT&T and other companies over the years.
- Sheer size brings with it difficulties with respect to growth. Some of the factories in China employ more people than entire states have population wise in the USA. Doubling production is a huge capital investment and requires finding skilled workers. Yes Apple has lots of cash but they are not magicians and can not wave a wand to get instantly functional production facilities.
- As alluded to above the political climate against success is a problem. Apple could very well end up paying far more in taxes. This could be a huge issue if excessively sever.
- Apple has way to much invested in production in China which leaves them exposed in several ways. For one there is a backlash in the US against Chinese products. More significantly though is that China is becoming very aggressive militarily which could lead to war or tight sanctions against China. It is the old story about having all of your eggs in one basket.
- Apple is product thin in its two biggest growth areas. This being iPhone and iPad. Though I believe they will address this with more products soon, relying on a one size fits all strategy is a mistake when you are talking about billions of customers. Ultimately this means leaving an opening for competition that they should close themselves. Studies have shown that to much choice chases away customers but I suspect that the converse also happens, that is to little choice drives customers away. Apple hasn't demonstrated the aggressive product development needed to drive sales further.
These are just a few issues but if Apple wants to double sales they need to obviously increase production. In some cases they are already fully employing all of a contractors facilities so doubling production might mean investing in another processor factory with Samsung for example. They have the billions to do so but it isn't a shake and bake dinner. It is interesting that Apple has been rumored to be looking at production at TSMC with people taking this as a freeze in relations with Samsung. I rather see it as a prudent measure because they had a real possibility of outstripping Samsungs production capacity.This is just one example of Apple having struggles that are a result of their sheer size. A small company that wants to double production often just buys a new machine and sticks it in a corner. To double A6 production they may have to build an entire factory. Which brings up another question, I wonder how much ownership Apple has in Samsungs new factory in Austin. I know a few years ago Samsung was looking for partners, it makes me wonder how much Apple owns of the operation.
Wow! Really?
This is the most pessimistic, fear mongering, weak minded, intangible, non rationale "argument" I've ever seen.
Problem right now is that AAPL supporters have nothing but logic, facts, statistics, and rationale to back up their investments while AAPL detractors have nothing but fear mongering, "bring the big guy down 'cause I ain't getting anything from him" hyperbole to fall back on. Problem is, both influence the Stock movement, but rationale will prevail. When AAPL was worth $50 Bill, they said "no way can they grow to $100 Bill", when it was 100, they said the same thing about 200, etc., etc., etc., etc.
APPLE/AAPL is in a transitional period, i.e there's a microscope on them, lots of pessimistic "click bait" to try and scare people. The company itself is incredibly growing and strengthening, nothing near hinting any signs any "pullback", however strong logistics saying the opposite. The Stock is priced as if Apple is going on hiatus for several years. Let Apple be Apple, and let the cobwebs fly off the Stock and watch greasy Wall Streeters have no choice but to stop the old game of "how can we put fear around AAPL".
Apple's Execs just had sizable Stock grants sent their way, and this is a capable team who will push for the worlds HEALTHIEST, richest, and most successful company to continue as it always has. Nobody likes working hard to lose money, and despite what fear-mongerers might have you believe, with every source that claims "competition" as some sort of end for Apple, as if they're forced to close their glass doors, Apple's team are a capable bunch who won't "sit back and let it happen". Disney CEO and new Apple Board Member, Bob Iger, just bought over $1 Million worth of AAPL Stock at $375-ish. Maybe he has a good hunch about Apple's future?
Wall Street has not only destroyed many companies but it has also destroyed the economies of the Western world. Yet they were powerful enough to get bail-out money from the bureaucrats at public expense. Except for Bernard Madoff who suckered many of the smart people from Wall Street to invest in his Ponzi schemes (HSBC and Citibank are some of the greedy victims) I have not heard of anyone from the rogue banks being jailed. The same people are still running the show with the same behavior.
As for the careerist Wall Street analysts, they have time and time again screwed up and always missed out on Apple. It is because they are beholden to Wall Street and so do not dare to go against the sacrosanct Wall Street's orthodoxy. They will be punished if they do. For more detail on this part, please download and listen to the podcast titled "Exile on Wall Street" on WYNC's Leonard Lopate Show from the iTunes Podcast store. Wall Street analyst Mike Mayo, who worked at six Wall Street firms, analyzing banks and protesting against bad practices for two decades, discusses the role of finance and banks in the US. In Exile on Wall Street: One Analysts Fight to Save Wall Street.
Why compare Apple to an enterprise that's in worldwide decline?
Apple was also in decline until Steve Jobs returned.
Wall Street is treating Apple as an aberration. Where every company were lapping up to Wall Street's guidance and wisdom, Apple is the only odd man out. Apple prospered and the companies that followed Wall Street's wisdom have to pay the piper and lost their shirts off their backs. And boy, Wall Street really hates Apple.... SNIP...
Blah blah blah blah. We all are looking for a target to shoot at for messing up Apple's performance. I've finally come to realize that it is Apple's very strength as a company that makes it possible for options traders to control it so much. Here's an article I read on Seeking Alpha that begins to explain what's going on with Apple. As best I can kluge my way through it, the hedge funds control it about 80% of the time, except when there is big news/earnings, then the open market comes through. The p/e will remain compressed for some time before the price breaks through to another plateau. Understand, they can't do this with an inherently weak stock like Amazon. It's neither good nor bad, it simply is.
I wish for a 10-1 split, it would be neutral to the stock price, yet be a strong psychological factor to get more people in the stock, and just maybe bring the valuation up a bit.
However, back in the day, remember when Microsoft stock split and split and split, to the point where if you had owned a single share from the early days you could retire a millionaire on it? Apple has far surpassed them. It should be the stock for this generation, yet due to the very sophistication of the market it is not. Sheesh, if it were valued freely, like an Amazon, it would be worth 3,000 a share!!!! I've read that the price would have to rise to $467 just to keep the current p/e ratio after earnings are reported for this quarter!
Ohhh, for the love of Pete I wish the stock were worth that much. It should rise $100 every year with no problems, but I wish there were a way to get the real valuation of the company in the share price to sell it, so that it isn't necessary to option the stock just to get any return from it. I don't want to be an options trader and I don't want to wait years and years either.
Apple was also in decline until Steve Jobs returned.
And that means what, now? Apple 1.0 and Apple 2.0 are very different beasts.
And that means what, now? Apple 1.0 and Apple 2.0 are very different beasts.
I think that we need to establish more distinction between stages of Apple if we're effectively going to talk about the post-Steve era.
If you want to use the 'version numbers' analogy, I propose we do it this way:
Apple 1.0: Original Steve (before ousting)
Apple 2.0: InterSteve (Scully, Amelio, and all that nonsense)
Apple 3.0: Second Steve
Apple 4.0: Post-Steve (today and beyond)
I think that we need to establish more distinction between stages of Apple if we're effectively going to talk about the post-Steve era.
If you want to use the 'version numbers' analogy, I propose we do it this way:
Apple 1.0: Original Steve (before ousting)
Apple 2.0: InterSteve (Scully, Amelio, and all that nonsense)
Apple 3.0: Second Steve
Apple 4.0: Post-Steve (today and beyond)
I think that now should be Apple 3P. P for post-Steve.
4.0 will begin once each product has been refreshed, because Steve was involved with the next ones. after that...