So right now it’s in the 590s. Analysts are expecting the new TV to be the new revenue catalyst; possible Cloud integration with iPad and iPhone; iPad sales expected to remain flat.
I just can’t envision everyone dumping their flat screen TVs for this thing, if and when it does come out. Who knows what this is gonna be priced at, $2K? Maybe $5K? Kinda tough to sell when you have 47 inch LCD TVs going for less than a grand nowadays.
I kinda agree. The thing I’m more scare of for Apple Stock is losing market share in the phone business.its pretty much half of their revenue. TV wont make up for that. It needs to be more. Much more.
Never had a position in this stock or researched it extensively but I’m wondering, is the iPhone losing steam? It seems to be getting very competitive with other OEMs catching up. I have a Samsung Galaxy S II that I got for free and I wouldn’t even dream of PAYING for an iPhone because the Galaxy is basically the same thing minus the fanboy satisfaction. I understand there is some loyalty in AAPL products and some stickiness / network effect, but who doesn’t already have an iPhone that is going to buy one? Non-power users such as myself will probably just go with price because smart phones are basically a commodity anyway and it’s stupid to pay $500+ when your new gizmo will be obsolete by market standards in the next 12-24 months due to the rapid design cycle. I just get a new phone every 24 months when my contract rolls over and while I don’t get THE BEST new phone every time, I get a great phone that is “good enough” for me, and I have to believe I am with 90% of the population on that one.
So what exactly is supposedly supporting a market cap of $565B for AAPL stock? They make commodity hardware in an increasingly competitive market and have some clever marketing but just lost their visionary CEO – or is there more than that? Why would you buy this stock at $605? I’m curious to hear the bull case (not saying there isn’t one, just that it’s not obvious to me what it would be at first glance).
500+?
I think most people buy with the plan.
Okay, who doesn’t have a phone plan already then? Where is the incremental demand going to come from?
It was $500+ when I tried to buy one without a crazy expensive plan from AT&T.
I actually don’t think their hardware is really commodity; maybe not everyone don’t view it as an improvement that’s meaningful or at all versus something like the Samsung Galaxy S2, but the key is that the strengths of Apple extend well beyond any one single device. In my view, there are a few things that support AAPL’s current market cap with room for upside:
(1) Excellent net cash position and cash payout policy – prior to Apple announcing its payout of a special dividend in March, investors weren’t sure whether Apple was making the right policy decisions with its cash on the books. Now that we’ve seen it happen and the company continues to generate cash hand over fist, there’s a lot more perceived margin of safety. Plus, with the upcoming product launches over the next year, there’s reason to believe continued robust cash generation – which is the best in the business – is sustainable.
(2) Defensible and self-containing ecosystem – if you’re investing in Apple, then you’re looking past current performance of iPad, iPhone etc. and even the next generation. What really matters more today versus a couple years ago is that wheras even two years ago the average customer may have owned one Apple product and other various PC products, more and more people today are owning multiple Apple devices. Furthermore, between now and the Windows 8 launch sometime in 2013, there is a tremendous opportunity for Apple to convert its customers to adopt multiple devices that are Apple-integrated (iPad, iPhone, Mac, Cloud, TV, etc.). As more customers become Apple-integrated, their switching costs will be even higher, so they’ll need to see more compelling discounts from competitors in order to consider leaving the Apple “empire.”
(3) China expansion opportunity – I actually think this is a driver for late 2013 and beyond, even though some investors are being into it already. I spent some time in China earlier this year doing some on-the-ground surveys related to consumer electronics products, and even though people are willing to line up for several hours just to get into the Apple stores in the big cities, Apple will need to invest more in distribution and mobile partnerships there before we see China’s next leg of growth. So, I don’t give Apple a whole lot of credit for China growth yet, but it’s undeniable that there’s a huge untapped market here and strong demand for the products. Moreover, when you consider my points #1 and #2, as well as valuation (point #4), maybe it doesn’t even matter!
(4) Valuation – AAPL shares are currently trading at about 14x calendar 2012 EPS and 12x calendar 2013 EPS. On a cash earnings basis, it’s trading at closer to 12.5x on 2012 numbers and 11x on 2013 numbers. Some of these multiples look a bit low since analyst EPS estimates have been ratcheting higher since May, but still, AAPL is trading at a discount to the S&P and other consumer electronics companies and I think its moat is real.
That’s my bull thesis on AAPL. I don’t have a short thesis but this is one company I’m willing to be more opportunistic about on trades. I actually pared my position on AAPL yesterday at $610 because I figured the markets had a chance to be down today unless the jobs reports were great (they weren’t), not to mention there’s historically some sell-off in advance of earnings reports (FQ3 is July 24). I might buy more shares if there’s more of a pullback before earnings so there’s more margin of safety, but I’ve already made the vast amount of my returns trading in and out of AAPL year to date, and am pleased with my returns especially on a risk-adjusted basis. Thus, I felt that yesterday was the day to realize more profits since I couldn’t see as much of a case to buy anymore shares ahead of the earnings call (and as a AAPL shareholder, “hold” is as good as “buy” for now).
Hope that helps…I would be very interested to hear a short thesis on AAPL, with specific comments regarding valuation.
I think tikka has the right idea focusing on the potential erosion of the phone business. AAPL really hit their big inflection point from a business model perspective with the iPhone because of the massive margins it could drive, but that appears to be eroding. I owned AAPL for a long time and sold recently because:
iPhone has 60% margin. iPad has half that margin.
Android has eclipsed iPhone market share, particularly among yonger people (15-35)…trendsetters.
Phone companies have/are going to change the subsidies on new phones and upgrades because of competition from other smart phones. Nobody is going to pay $600 for a iPhone, margins must come down or market share dwindles.
I’m not due for an upgrade until next year but I already saved up to buy the 5 when it comes out.
Bromion - have you looked at this stock: IQNT?
It looks really cheap, but I cannot figure out what they do…just curious to know if you’ve looked at it as it is in your market cap “bite size”.
Yes, I looked at this very briefly in late 2008 when it was still Neutral Tandem. I believe the stock IPO’d a few years prior and it came up during a screen of all IPOs that were down a lot post-Lehman (I went through most or all of them from 2005 or 2006 on looking for gems). I remember spending about an hour on this and thinking it was pretty hard to understand and then moving on. I won’t do it justice, but the gist is they own switching networks that patch calls through on hardlines across various parts of the country. If I’m calling someone in New York from California, that has to go through several networks, and a company like NT somehow earns change over fees on that. Apparently they do something with internet connections as well.
If you want an initiation report, drop me a line at bromion15@gmail.com and I will try to pull one for you.
I’ll stick with my original guess that Apples misses today. Not a huge miss…I’ll say $10.15 EPS. Having not blown away estimates they’ll sell off in after hours trading.
I’m basing this off of pretty much nothing. They didn’t have a major product launch and I think people are holding off on buying a new iPhone until the iPhone 5 comes out this fall.
Let’s make this fun. Someone else throw out some numbers.
$10.14 EPS based on your post.
EPS consensus is at $10.35. For the sake of pleasurable debate here, I don’t think AAPL will miss simply based on its track record, so even though I don’t normally bet on quarters I’m going to say they report in-line! However, I do think guidance could come in below expectations simply because the Street has ratcheted its estimates higher and higher over the last few months. Anyway, I still have a small long position in AAPL after taking profits at $610 on July 6 (see my earlier comment on this thread), so just going to keep my fingers crossed and hope for the best!
Well, the numbers are out and it’s a big-time miss for AAPL - $35bn vs $37.22b consensus for top-line, and $9.32 vs. $10.35 consensus EPS. However, the main reason shares are down after hours is because next quarter’s guidance ($7.65) is majorly below Street ($10.22), not to mention iphone unit sales missed too. Good thing I pared my position a couple weeks ago and that I don’t normally bet on quarters (still bad for the shares I still own though). Anyway, looking forward to the earnings call now to see whether there’s really a slowdown in global demand and loss of share to Android, or if there’s a chance to buy on weakness as there was in fall 2011.
I don’t think people are that thrilled about the dividend either.
Wow $9.32 lmao
if you feel lucky you didn’t own more simply cause of a stupd earnings miss you problably shouldn’t own the stock in the first place…
I feel fortunate that I pared my position ahead of the call. My decision for that trade is more of a function of valuation rather than whether I think AAPL is a good buy or sell for the long-term.
This. I don’t understand why quarterly earnings results matter…or maybe we are speaking a different language.
In my view, quarterly results matter for companies for different reasons – whether it’s a temporary blip, something revealing of a broader secular or cyclical trend, analyst expectations being out of line with reality, etc. Even if one is a longer-term “value investor” and he/she is unconcerned about shorter-term fluctuations in price, earnings calls always matter because stocks trade more on earnings calls than on any other periodic event, and the information provided in the calls provide investors with a gut-check on potential disconnects between reality and Street expectations. It’s fine to say that you won’t change your long-term view based on earnings, but there’s a huge difference between saying that and saying quarters don’t matter since a lot can happen in the short and medium term before your longer-term view, even if correct, is realized.
I think my very view on AAPL is reflective of my view on investing overall – even though I think AAPL is a good long-term company and still at an attractive valuation, I increase and pare my positions based on valuation and whether I think fundamentals are improving/receding between earnings announcements. That doesn’t lessen the importance of earnings results, however.