Investors should give Apple's Q1 2013 call 'another look,' Barclays says

13»

Comments

  • Reply 41 of 52


    Sounds like a plan, then the kid can get other girls knocked-up, send them work at Mcdonalds and live off the profits... /s


    Quote:

    Originally Posted by Apple ][ View Post




    If a 16 year old high school kid comes home with F- grades and he tells his parents that he also happened to get a girl knocked up, would the father go out and buy his son a Corvette?


  • Reply 42 of 52

    Quote:

    Originally Posted by Mikeb85 View Post


    Multiples of what?  Earnings?  Revenues?  I just gave you a bunch of reasons.  Amazon has good revenue, cash flow, cash from operations, they buy


     


    And again, don't compare the two.  It's like the proverbial Apples to Oranges comparison...  



    Orange is in the telecom business :p


    http://shop.orange.co.uk/mobile-phones/iPhone-5-16GB-black

  • Reply 43 of 52

    Quote:

    Originally Posted by jragosta View Post





    Excellent point. A large part of Amazon's success was that people saved 3-9% of the purchase price when they didn't charge sales tax. That gave them a significant cost advantage over local retailers. With the tax advantage disappearing, their competitive advantage is smaller.

    That was before the earnings release. Profits are down and stock price is up, so the P/E will be much higher than that.




    I'm surprised people only look at the money aspect. I go to Amazon all the time, not for the price, but for the reviews. If I want to know how good a jacket is I go to Amazon and see what people have written about it. If I have a widget to sell, I'll sell it through my Amazon account. I regularly use Amazon Video through my Roku box to watch movies. Amazon is so much more than saving 5% on your purchase price, I don't even look at that anymore. It's great to save money, but there's so many other reasons to visit Amazon.

  • Reply 44 of 52

    Quote:

    Originally Posted by sog35 View Post




    "I'm just trying to illustrate why the market moves the way it does - because it is entirely rational."


     


    That's the most ridiculous thing I've read in a while. 


     


    You cannot seriously compare Apple to Exxon.  Apple's revenue for year ending 2012 grew 44% from 2011.

     



    Markets are rational, it's just not always apparent at the time, for the reason we might think.  


     


    And yes, of course you can compare Apple to Exxon - they are the only 2 companies around that same market cap.  And Exxon's revenue was 467 billion in 2011 with 40 billion net income, 111 billion in revenue and 9 billion in net income for the last quarter they reported.  


     


    As for Apple growing their revenue 44% year on year, that's impressive, the market is betting they won't do it again.  If you think they will, by all means buy stock, I guarantee, if at this time next year Apple reports a 44% y/y increase and their valuation is the same as it is now, the stock will go up.  But the market is betting that Apple has likely reached their peak.  

  • Reply 45 of 52
    MarvinMarvin Posts: 15,309moderator
    mikeb85 wrote:
    Furthermore, your second sentence makes no sense.  Companies generally don't finance after their IPO, most new shares on the market are the ones granted to employees.  Share price doesn't affect a companies' financial situation whatsoever.

    If the share values were tied to earnings they could, which is what I was suggesting. Right now they aren't, which is pointless because people are just trading on the perception of worth. It doesn't matter how good Apple does financially, if people don't think they're going to keep improving at a certain rate, they lower their value of them but in the end, people are in it to make money. Apple is making money (unlike Amazon) so it's completely backwards to have investors in them lose money when they do well and have investors in other companies make money when they perform poorly. That is a broken system.
    mikeb85 wrote:
    Here's a financial indicator for Amazon that might help explain why investors love it. From their results yesterday, Operating Cash Flow for the quarter was 5.1 billion, or 24% of revenue, which was a staggering 21 billion dollars.

    Apple is still doing better than them though. Saying that the market caps make them different is circular reasoning as the market cap is based on the share value. How is it rational that having a high market cap causes share price to fall under certain circumstances but under poorer circumstances causes the share price of a company with a lower market cap to rise?

    What you seem to be calling rationality is the determination of investors' perception of worth, which is really not much more deterministic than being able to spot someone's poker face.

    If it's so rational then there's a simple, rational explanation for the sharp drop. What is it?
    mikeb85 wrote:
    As for Apple growing their revenue 44% year on year, that's impressive, the market is betting they won't do it again. If you think they will, by all means buy stock, I guarantee, if at this time next year Apple reports a 44% y/y increase and their valuation is the same as it is now, the stock will go up. But the market is betting that Apple has likely reached their peak.

    I saw this while I was posting and that is what I expected was the answer to my questions before. I still don't think that justifies a drop otherwise other big companies with poor or no growth would drop too and Apple is still doing really well.
    mikeb85 wrote:
    it is entirely rational... the market is betting

    Can you use those two terms to describe the same thing? You can make an informed bet but it doesn't make it entirely rational.
  • Reply 46 of 52
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by Marvin View Post





    If the share values were tied to earnings they could, which is what I was suggesting. Right now they aren't, which is pointless because people are just trading on the perception of worth. It doesn't matter how good Apple does financially, if people don't think they're going to keep improving at a certain rate, they lower their value of them but in the end, people are in it to make money. Apple is making money (unlike Amazon) so it's completely backwards to have investors in them lose money when they do well and have investors in other companies make money when they perform poorly. That is a broken system.


     


    Share value HAS to be tied to 'perception of worth' ie. value of the firm.  Markets are valuation mechanisms.  Whether it's a street market in a 3rd world country or capital markets in NY, Hong Kong, Paris and London, markets are systems that determine value (ie. market cap).  


     


    If you want Apple to spread the wealth, lobby them to increase the dividend.  Because real income in the form of dividends is how public corporations are supposed to act once they're 'mature'.  


     


    I don't know what you know about economics or the financial system (doesn't sound like alot) but what you're proposing simply can't work.  It's akin to trying to impose communism on the capital markets...  


     


     


     


    Quote:


    Apple is still doing better than them though. Saying that the market caps make them different is circular reasoning as the market cap is based on the share value. How is it rational that having a high market cap causes share price to fall under certain circumstances but under poorer circumstances causes the share price of a company with a lower market cap to rise?



    What you seem to be calling rationality is the determination of investors' perception of worth, which is really not much more deterministic than being able to spot someone's poker face.



    If it's so rational then there's a simple, rational explanation for the sharp drop. What is it?



     


    Market cap IS value.  Share price is nothing more than market cap divided by outstanding shares.  So value (ie. market cap) is what we care about.  Apple's high market cap didn't cause the share price to fall, rather, Apple reached a level of value that the market didn't think they're worth in the long term.  So they sold their shares, and because of supply/demand dynamics the value of the firm went down.  


     


    In the case of Amazon, their valuation is equal to or possibly less than the market thinks the company will be worth in the long term, so the share price rose/stayed high.  


     


    Now, valuation determines potential growth because the bigger you are, the harder it is to find growth.  This is a general rule of economics, it's why India is growing faster than the U.S. or Canada, even though the U.S. and Canada are much richer countries.  


     


     


     


    Quote:


    I saw this while I was posting and that is what I expected was the answer to my questions before. I still don't think that justifies a drop otherwise other big companies with poor or no growth would drop too and Apple is still doing really well.



     


    Dividends are the answer to this.  Microsoft's valuation has been more or less steady because they pay a very healthy dividend (5% yield).  Most large companies that are profitable but not growing pay dividends, so for funds and risk-averse investors, they can invest in these companies and make risk-free income.  


     


    If Apple instituted a dividend at 5% yield, you can bet you'd never see their share price dip below that level until the end of time, as long as the dividend gets paid and doesn't decrease.  

  • Reply 47 of 52
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by Marvin View Post



    Can you use those two terms to describe the same thing? You can make an informed bet but it doesn't make it entirely rational.


     


    I guess it does depend on your precise definition of rational, which is something that people from various disciplines can't even agree upon.  I'm using it in the sense of being able to come to a conclusion based on the facts available, in a methodical and educated way.  That's not to say everyone who invests in capital markets behaves rationally, but the vast majority of trading volume in markets does come from professional traders or computers, most of whom invest based on principles of math, economics, and other mostly objective measures.  


     


    Some would argue that gambling is irrational, but when I gamble, I know exactly what my odds are, and I can put a value (ie. how much I want to lose) based on how much I'm enjoying the experience of it all.  If I'm at a roulette table, with my wife at my side, a cold drink and having fun, I'm willing to lose alot more money than playing a VLT in some seedy pub.  To me, being irrational means not knowing the consequences of what you're doing, and making a decision without considering all the available information.  Being rational means knowing what the consequences are, and using all available information to make a decision.  

  • Reply 48 of 52
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by sog35 View Post


     


    Then the 1999-2000 bubble was rational?  Was Toilet.com worth 20 billion dollars?  According to you even those worthless .com companies had real value since the market is ALWAYS rational.



     


    Lol, maybe a moment of irrationality?  Much like leading up to 2007?  I mean, I might argue that based on the growth trajectories of some tech companies investors may have had a bit of rationale in valuing so many companies so highly, but obviously they were overly optimistic.  


     


    The sharp drop offs were the rational bits.  When people realized what they had was over-valued and sold, dropping the price.  That was rational.  


     


    Maybe I slipped a little if I implied that the market is always rational, but it does always return to rationality.  If it has an irrational moment, it will always (eventually) adjust accordingly.  Valuations aren't perfect all the time, but they always return to a level where they are.  Over time the market always adjusts itself to where it should be.  

  • Reply 49 of 52
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by sog35 View Post


     


    But how long is eventually?  How long can markets stay irrational? Months, years, or decades?


     


    i think Amazon's decade of irrational valuation is about to run out.  Their revenue growth of 25% in 2012 is just not enough to justify a 1,000,000 PE.



    I think with Amazon we need to look at revenues, and gross income.  Once they reach a certain level of maturity where Mr. Bezos feels it's time to realize profits, then they can be properly valued.  But based on revenues, margins, etc..., I think they're valued slightly optimistically, but I don't think they're terribly over-valued.  Again, when looking at the overall value of a firm P/E isn't the most important measure.  You can always cut costs, it's more difficult to increase sales....

  • Reply 50 of 52
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by sog35 View Post


     


    But their gross margins are HORRIBLE.  I still don't understand how they get away with misleading profit and loss statements:


     


    61 Billion sales


    46 Billion cost of sales


    25% gross margin


     


    But guess what expense they don't include in gross margin.  Fulfillment and content.  How are those things not included in gross margin?  How is the cost of content not part of cost of sales (cost of movie license for streaming).  Now add those 2 items and see what the gross margin looks like:


     


    61 billion sales


    46 billion cogs


    6 billion fulfillment


    5 billion content


    57 billion REAL cost of sales


    7% REAL gross margin


     


    With more revenue their fulfillment costs will not go down. They will need to build more warehouses, pay more sales tax, pay more workers, ect. 



     


    And this is why they don't have Google's valuation.  They are valued at just over twice their revenue, which is reasonable.  Anyhow, you don't need to invest in Amazon, maybe the bears will be proven right, maybe the bulls will be right.  Maybe Jeff Bezos will just take it private?  


     


    Either way, Apple vs. Amazon isn't a valid comparison, investing in one doesn't affect the outcome of investments in the other, and investors need to be informed to be capable of rational judgement.  I'm just trying to explain how things are.  


     


    By the way, I've owned Apple shares at various times, never owned Amazon shares.  Currently the only shares I own are in companies listed in Hong Kong...

  • Reply 51 of 52
    MarvinMarvin Posts: 15,309moderator
    mikeb85 wrote:
    Share value HAS to be tied to 'perception of worth' ie. value of the firm.  Markets are valuation mechanisms.  Whether it's a street market in a 3rd world country or capital markets in NY, Hong Kong, Paris and London, markets are systems that determine value (ie. market cap).  

    If you want Apple to spread the wealth, lobby them to increase the dividend.  Because real income in the form of dividends is how public corporations are supposed to act once they're 'mature'.

    When you are trading on future potential with the intention to sell, it does have to be based on perceived future growth. I just think the motivation should be to stay with the investment when the company does well. The dividend increase would be an option but possibly not a good one here:

    http://www.insidermonkey.com/blog/apple-inc-aapls-dividend-isnt-the-problem-49865/

    You're right though, it really has no bearing on the company whether the stock does well or badly. If Apple continues making way more profit as time goes on, it's the loss of investors who dumped the stock and if not, the loss of those who didn't.
Sign In or Register to comment.