Talks about how Apple consistently sandbags its estimates, so it can blow through them later. It sounds very much like Steve Jobs's MO:
"Jobs is incredibly and famously promotional when unveiling products, but when he talks numbers he has always been just the opposite -- a conservative player, sandbagging like there is no tomorrow. His dual nature throws people off."
But it looks like underpromise/overdeliver has bitten the stock.
"But it looks like underpromise/overdeliver has bitten the stock.
Time to buy!"
--Not really. It just sound that the market is saying: "in time a recession, people have hard time to justify spending 1,700 in a useless laptop, or more money on expensive stuff." Since apple represents the medium and higher end spectrum on personal computers, people will be much much more price sensitive to pricing.
The cheapest usable windows laptop, about $400. The cheapest Mac, about $800, making it almost a luxury good. In hard times, it is the luxury stocks that gett the beatings. Apple will have to either sell less laptops and gadgets (fewer people will be able to afford or justify the extra $$), or drop the prices (and margins) to the current products.
Well, yes and no. An old employer of mine used to say there's always work for the top 5%. I'm pretty sure apple will be able to hang on to the top 5% of the market. The top 5% can afford apple in spite of recession.
Heck, even in the good times, The CEO gets the macbook pro. everybody else gets dells. I would bet up to 43 cents the CEO continues to get the shineyest newest toys ever year, while grunt staff's computers are kept in service an extra 6 months to two years to save on costs.
Now, if you'd said they make their money from ipods, then I'd completely agree.
Don't beat yourself up about it. A lot of the time, the market can stay irrational longer than you can afford to bet against it.
That's why economists are famous for predicting Five of the Last Three Recessions -- they know that a dip is necessary, but not when it's going to start.
Apple laptops are nowhere near saturated. The downsides of owning a non pc have greatly been reduced if not eliminated lately. I think apple laptops could really take off.
The iphone is also nowhere near saturated. Many people are waiting for the next release or waiting until their current contracts are over to get one.
Also, the apple tv if done right, especially with the movie rental service could become the next ipod.
I thought that too re: laptops until I bought an Apple. The major downside of owning one is the price, and that's the worst downside you can have. There is also the support (I'm sure I'll blog about our company's experiences with that eventually) and the fact that virtualization is expensive (requires windows + parallels) and still imperfect.
iPhone isn't saturated, but I'm still bearish on that. And extremely on the TV. Cable VOD has a box in everyone's home already.
A high price tag on the product is the least worst downside you can have if the margins are high. You can always lower the price, but you can't improve the product in other ways if you lack the expertise.
Their main product as in their computers? Oh, you're talking about their mp3 players. Yeah, those are quite oversaturated, but funny thing being that they keep pushing refreshes continuously and people still buy them, 22 million of them in one quarter. You heard of this other thing they're selling? iPhone? Their P/E ratio in the past a couple of years have been soaring because of the optimism and momentum people think Steve Jobs bring to the table. Even if it's self correcting it'll just go back up again as Apple cranks more products throughout the year.
Like their $1800 laptop that has about as much utility as the $300 ASUS EEE PC? (ducks)
Steve Jobs has done an amazing job turning around the company and much of this enthusiasm is warranted. However, the stock got way ahead of itself.
I considered shorting the stock also, but that is just way too risky. A stock only has to double to wipe out the entire investment. And, if a stock is already irrationally high, it could very well go substantially higher in the short term. However, put options may be a good way to bet on the downside while limiting risk.
At this point, I do think they are pretty close to an appropriate valuation. If they get another hit with their iPhone and their computer market share increases, they will do very well. But, I think this is far from a sure bet.
I would. I also see this as the temporary result of investor panic, recession, etc. Between last week and this week, Apple is in no worse condition personally; the market is. There earnings report was a record quarter, beating even the analysts expectations. Most of the backlash seems to be because they had low estimates for next quarter, but they typically make very conservative forecasts, and they've beaten them consistently for a while now. So I'm hoping/expecting the stock to rebound, slowly, over the next couple months.
The estimates weren't even that bad-- look at the year ago estimates. The company is thriving, making tons of money, and growing at greater-than-industry rates. It's pretty crazy how irrational investor behavior can have such a huge effect.
A friend of mine at Apple reminded me yesterday that they made 300m on just the interest of their war chest. A few years ago, they were having trouble making that much just on their products.
Their P/E ratio, after the drop, is near 30. You have to grow far above industry rates to justify that.
The drop may be caused partially by irrational behavior, but in poker we say that even the blind squirrel finds an acorn eventually. In this case, irrational behavior partially corrected opposing irrational behavior.
"A friend of mine at Apple reminded me yesterday that they made 300m on just the interest of their war chest. A few years ago, they were having trouble making that much just on their products."
That's evidence that they'll stick around, but it's a bad sign when a company makes most of their money from depositing cash in the bank. It's irrational to value $1 of Apple-cash at much more than $1 if the main selling point is that they won't spend it: you can do just as well putting your own money in the bank, and save the brokerage commission.
http://www.thestreet.com/pf/newsanalysis/media/10399930.html
Talks about how Apple consistently sandbags its estimates, so it can blow through them later. It sounds very much like Steve Jobs's MO:
"Jobs is incredibly and famously promotional when unveiling products, but when he talks numbers he has always been just the opposite -- a conservative player, sandbagging like there is no tomorrow. His dual nature throws people off."
But it looks like underpromise/overdeliver has bitten the stock.
Time to buy!