“Most of us, including myself, suppose that Apple (AAPL) will be around in three years,” James A. Kostohryz writes for Seeking Alpha. “But the more relevant question to ask is how much should an investor be willing to pay for shares of the company three years from now? Or, in other words, what is the value that investors should assign to the free cash flow that Apple can generate for common shareholders after 2016?”
“This question is of fundamental importance, because only a very small fraction of Apple’s current market value – about $26.00 per share – can be justified by discounting the cash flows that the company is currently scheduled to distribute to shareholders in the next three years via dividend payments, through the end of 2015,” Kostohryz writes. “Therefore, to be able to justify Apple’s current stock price of roughly $450 per share, we need to have clear vision of how successful AAPL’s business is going to be in the future and how the company is going to be able to continue to provide cash returns to common shareholders after 2015.”
Kostohryz writes, “The industry that Apple operates in is notoriously fickle, cutthroat, cruel and unforgiving… Only one thing is certain: The Apple that we know today will essentially no longer exist three years from now.”
Read more in the full article here.
MacDailyNews Take: Our first reaction to the headline was, “They’d better or we’ll have to get real jobs!”
After reading the article, we agree that the Apple we know today essentially will no longer exist three years from now (perhaps a bit hyperbolic), unless Tim Cook and Co. fail to do their jobs properly.
“I see cannibalization as a huge opportunity for us… Our basic philosophy to never fear cannibalization. If we do, somebody else will just cannibalize us and so we never fear it.” – Tim Cook, January 23, 2013
Anyone who is long AAPL is likely long because they believe in the company’s ability to disrupt markets. There are certainly plenty of markets open to disruption. Assuming that Steve did in fact imprint his DNA on the AAPL “team”, our belief and faith will most likely be rewarded no matter the landscape three years from now.
I vote for Kostohryz to be our village idiot.
I don’t want to help raise him, the rest of the village can.
That village being the world
the question is will apple cannibalize its own iOS sales
letting iOS cannibalize the Mac and ipod sales was easy since apple wasn’t that large of a company before the iphone. being the second largest company in the world is different
but then again, i think we are at the end of the current tech revolution. at least at the real innovation part of it. the next few decades will be like the 20th century, refinement of the original ideas
Good luck with that theory – I hope, for your sake, that your retirement account isn’t tied to your predictions.
The company called Apple will in three years have a market capitalization in excess of $1 trillion
Absolutely. But then what??? How can they possibly survive MORE THAN three years? Certainly with only a quarter of a trillion dollars in the bank at that point, they’ll be days away from bankruptcy.
With the amount of reserve cash Apple has, they can afford the BEST of anything without even breaking a financial sweat. That alone, to me, gives Apple a huge edge over its rivals of whatever field it moves into. They could afford the BEST server farms, the BEST manufacturing facilities, the BEST engineers.
Take that new Qualcomm LTE superband chip. In theory, Apple can go to Qualcomm, cash in hand, and order 50 million of them and simply ask how soon can it get them. I honestly don’t understand why Wall Street is so sure Apple will fail when it has that much cash. I really must be overlooking something. I’d figure any short-term potholes in the economy that would trip up most companies, Apple would barely notice having plenty of cash to fill in the holes.
Don’t forget that predatory business tactics is what America is all about and when the greed steps in, there’s no telling how far it goes…Einhorn just got a judge to embolden his intent to raid Apple’s cash
Only if they bring back the Newton.
Already starting the end of Apple crap? Really?
You know Apple of the 90’s was hell of a lot smaller than today right. They survived some really hard times. 3 years with the kind of money they have saved and the kind of products that are still selling in record territory. Easy for Apple and more products coming. This story and question is STUPIDITY!
forget about selling stuff in record. time is changed. consumers just don’t spend money for premium price tag. nowadays you can get high quality electronic gadget with low price anywhere. you don’t want to spend that much money these days (bad economy). if apple won’t find very innovative way for new market, it will fall faster. but of course, it will be still survived in the end. the effect on market will be shrinking so much. as a result, it will be similar with MS. don’t you believe it? you will see. by the way, I bet that apple won’t be successful in Chinese market. period. there are lots of facts they should eliminate. but I don’t think that apple can. most people in China can’t afford to buy apple products. do you ever know how much monthly salary people earn?
If Apple no longer exists in the future, I am willingly to bet that the cause will be the interference of people like Einhorn who make it sap its current financial strength in order to satisfy their greedy, amoral concept of how capitalism should work. As a result, Apple will not be able to take advantage of some opportunity that will require financial resources that they will not have. Again I say, Einhorn, if you don’t like what Apple is doing, sell your shares and go screw up someone else.
Exactly. I’m getting sick of that little bag holder cry baby weasel trying to dictate how Apple should allot its cash. He could be screwing up Apple’s long term plans. The greedy longs that worship him will be deer in headlights when they wake up to find that AAPL has morphed into a MSFT type value stock. Careful what u wish for!
Baloney. In the end, Apple’s board controls the policies for cash flow. Unless people like Einhorn can organize a mass revolt and elect completely different board members, Apple will continue handling its finances as it sees fit.
If not, then who will? No one.
Read the entire blathering article this morning.
Needless to say my conclusion is that mankind and its future hang in the balance of total and utter destruction due to well you know … Because I say so????Because the future is the reason for AAPL’s inevitable DOOM!!??? GMAFB
is this guy talking about?
everybody knows that. If you discount the value of the company, considering all the technology, know how and products that they are incorporating at the moment, you can justify this price. APPL ha a P/E of 10. Meaning that in the long run the market thinks that earning per share are going to become X10 what they are now. I think it can happen with all the Emerging Market still out there thirst of chess technology and the most important products still to come (TV and house intelligence). To give an example Amazon’s P/E is over 3,000!!
The question is quite preposterous, if you ask me. Apple will be here for the foreseeable future. I do think however that the passion many of us who are long-time Apple users once felt has been tempered a bit by some developments. No, I am not speaking of cursory issues like the size of a phone etc. I am speaking of the lack of attention to pro apps like Aperture.
For the first time in many years, I find myself looking at alternative applications in the spaces where Apple once reigned supreme. Aperture is one. As a professional photographer, I am well aware of industry developments, and how Apple has fallen a bit behind (bite my tongue) Adobe.
What this means is that as I teach photography classes or make recommendations to new photographers, my recommendation for the Apple product – in this case Aperture – is less enthusiastic than it used to be.
I suspect Apple will be around for a long time to come. It simply will not be the Apple we used to know.
@DavidF — “I do think however that the passion many of us who are long-time Apple users once felt has been tempered a bit by some developments.”
Nowadays, I sometimes loathe Apple because of their removal of the anti-glare matte screens from iMacs and desktop hardware. Even with notebooks, an anti-glare option is only available in the 15″ MBP, not for the 13″ nor for any of the MacBook Airs.
With Apple sitting on a diahorrea’s worth of cash, they only condescend to supply an anti-glare for the 15″ MacBook Pro – nothing else.
Not saying everyone needs anti-glare, but many do.
Even the iMac late 2012 with its less-reflective screen still lets you see the background reflections clearly, so that’s nowhere near an anti-glare.
@KL really? I am looking at my 27″ right now. Have been for the last month. You are NOT looking at a late 2012 iMac. You may have seen one in a store. You do not own one. As for the Airs, I have 2012 13″ and it is much better then the 2009 17″ I replaced. methinks thou be of the trolling kind…
Apps like iTubes and IPhoto are shadows of their former selves, iWeb disappeared, and iMovie crashes my MBP.
Conclusion – AAPL software engineers need to improve apps, not wreck or RIP them.
If iMovie crashes, did you write up a bug at bugreport.apple.com with valuable info so they can look into it?
Will Seeking Alpha exist in 6 months? Stay tuned!
of course apple will still be in existence in three years time. the REAL question is will apple be relevant. ?
Apple of coz will be here , and will be full of them , in supermarkets .
The sky is falling! The sky is falling!
There are 140 Billion (with a capital B) reasons why Apple will be disrupting markets and making cool stuff for a long time to come.
The real question is how does a guy like Kostohryz get away with this mindless hypebole and will he even survive the dumbdown standard of ‘journalism’ and have a job in another 3 years?
I have no doubts the Apple we once knew and loved has died shortly after Steve Jobs passed. My concern is, can the new Apple continue to to grow, not at the rate it once did but you know what i mean? Or has the rotting of the fruit begun?
Headline should read . . .
“How to Sucker a Reader in with a False Headline”
I think more people need to start ignoring link bait.
Somebody needs to disrupt the cable companies. What a rip off. I say build a nationwide wireless internet network.
Apple just needs to hold on for another 18, then Steve’s clone will be of age to take over.
Why do we never see big headlines asking this question of Microsloth? A company with it’s head in the toilet on a regular basis.
“Beleaguered” Apple. The headline should read “Will Beleaguered Apple still exist in 3 years?”
There, fixed it.
/s
Do people ask where Dell or HP are going to be? Do they ask that question of a declining Microsoft or a foundering RIMM/Blackberry? No. They choose to ask that question about an immensely profitable company with a range of popular products, a highly functional and integrated hardware/software ecosystem, enormous reserves of cash and securities, a history of transformative innovation, and no long term debt. GIGO. Not worth the time to read it.
I read a couple of years ago that if M$ had flat earnings they could exist for 25 years on just their cash.