“There are two Apples: AAPL, the stock, and Apple, the company,” Neil Cybart writes for Above Avalon. “While it would seem logical that one is merely a reflection of the other, in reality, the two are guided by vastly different parameters. ”
“Over the long run, Apple and AAPL will likely be at odds with each other due to the very nature of Apple’s long-term mission of making products that people love,”Cybart writes. “It is the classic Wall Street vs. Silicon Valley battle, and 2015 was likely just a taste of what is to come. ”
“From a historical perspective, very few companies have been able to do what Apple is striving to do: remain relevant. While companies like Nike and Disney are often used as models for Apple, in reality, they aren’t the best examples. Instead, a company like Sony does a much better job at showing what Apple is trying to avoid: losing sight of the hockey puck and not knowing where it is headed,”Cybart writes. “To accomplish this goal, Apple will need to reinvent itself. If that wasn’t difficult enough to do, to expect Wall Street to get behind Apple and such reinvention is overly optimistic. ”
Much more in the full article – recommended – here.
MacDailyNews Take: As always, Wall Street will get on board and off the AAPL train seemingly at whim. Facts have very little to do with it.
Both Apples are are solid ground, when facts are actually considered, in a dumb world of soundbites, gossip and innuendo.
How very true. AAPL is totally driven by analyst FUD. Bears no resemblance to Apple the company.
And Apple the company, or Its CEO, is not attacked by FUD all day long???
Not the same.
FUD has impact on AAPL because the sentiments of millions of people drive stock prices. This is true of all stocks.
In contrast, Apple’s CEO can ignore FUD as he chooses, because Apple is very profitable and the happy board of directors continues to support him in that position.
Wall Street is fuelled by fear and greed. Apple is fuelled by the virtue of excellence. The stock markets are not in the least virtuous while Apple strives for many positive values. AAPL is controlled by the fear and greed of the many traders who try to make their living off the backs of successful companies or try to make money off of struggling companies by bringing them down and short selling.
Apple has set a corporate example for the companies of the world to follow and as the other companies follow, so will Wall Street follow a few decades later.
It works both ways. If you bought Netflix at a low price you would be very happy with its valuation now.
Difference between aapl and netflix / amazon is that Apple make extremely large profits. That guarantees some security when the market manipulates the stock up or down. With netflix and amazon they can only push it up on expected growth potential.
It makes no sense to me given Apple’s control in major markets. Apple will continue to take advantage of the current situation with massive stock buybacks. I would also like them to increase the dividend yield which may be possible if they take a lot more shares out with the buybacks.
To be accurate, Amazon is an extremely well run company.
Apple and Amazon have very different profit taking vs. re-investement strategies because their products, services and strengths are very different.
In Amazon’s case, it is forging profits because it has the opportunity to scale up infrastructure to deliver hundreds of thousands of additional products to customers, including everything from food to very expensive and niche items.
It is also scaling up digital infrastructure, such as its elastic cloud which powers many well-known companies.
If Apple could sustainably scale its sales according to infrastructure, it would forgo profits do the same thing. But it only sells a few products, so that is not a good opportunity for Apple.
They are forgoing profits, absolutely. They lose money on everything except for web services (which an activist shareholder should get them to spin off). The problem with this model is that the moment they raise prices, they will face actual competition. Amazon has started a race to the bottom that can only be “won” by exploiting the margin difference their “efficiency” advantage gives them.
The problem is, that their edge can never be more than a few percent. Which means their margins will never be greater than say, a supermarket (2-3%). Which means their stock is overpriced by about two orders of magnitude.
There is some pathetic hope here that people will become Prime members and stay addicted to Amazon to automatically refill their Tide and paper towels etc. Everyone I know that has ever had a Prime subscription has let it lapse after the free trial was up, or maybe a year. The need and novelty wear off quickly.
You are forgetting that retail is a heavy infrastructure business, even if it is sales to customers happen over the Internet.
There is no race to the bottom because nobody could build out that kind of capacity, relationships and organization without also putting in decades of work.
And in any case, Amazon does not need to raise prices to make a profit. As soon as they slow their insane investment in rapid expansion they will be profitable.
Actually there are several more apples, apple the edible fruit, Apple the multimedia company founded by the Beatles and much much more.
Still it’s impressive to see that a jouranalist can count as high as two. Maybe one day we’ll be able to see one walk and chew gum at the same time.
ain’t no arguing with the basic thesis in the article, but i wish mr. apple would up our dividends by a stiff bump and reward those of us who are investors and stick with the company, even as our stock valuations continue to erode due to the greed of traders whose only interest is in making short term profits.
the company will continue to prosper, so how about letting the rest of in on the deal, and make our steadfastness a bit more rewarding ?
Doesn’t work that way. A share, is a share, is a share…no matter who owns it and institutional shareholders far outnumber individual share owners so their pot will always be bigger. Besides, it would be illegal to reward one class of share owners only.
well it works that well for me, and for other buy and hold investors.
wall street will always profit no matter what – and, not infrequently, at our long term expense, and their short term gain.
but, perhaps i was unclear in my remark about rewarding investors rather than traders. i was not suggesting that only long term investors be granted larger dividends. larger dividends would go to all who hold the stock.
but we peons are getting clobbered and would appreciate a reward for our faith and continuing investment in the company. our futures are closely tied to it.
and if the large institutional holders benefit from higher dividends ? so what ? we do too
think of it as the republicans do… trickle down economics in action.
besides, given the current state of affairs i am not seeing much in the line of concrete benefit to us investors from mr. apples stock but back strategy – especially when he starts re-issuing out millions of those shares they originally retired to new, high level hires.
so to reprise field of dreams, am i asking whats in it for me? yes i am asking what’s in it for me. and the rest of us who invest and don’t trade.
There must be a solutions or strategies to combat Wall Street negativity about Apple. Apple needs to hire Wall Street consultants like Google, Amazon, Facebook and Netflix did.
It was a very interesting article. Whenever I read about Apple and AAPL, I always have to chuckle.
I remember how Apple shareholders used to laugh at Amazon for being a profitless company and wondering how it was possible for Amazon to stay in business. Now it’s Apple shareholders who are the biggest losers as Amazon never falters and it’s Jeff Bezos who is practically worshiped by Wall Street for being such a CEO genius. Amazon after going up almost 120% in share price in 2015 is still being upgraded while Apple which was well down in 2015 is now being downgraded even further this year. I must say, for an Apple shareholder, it’s an ugly turn of events. How is it that one CEO never makes any mistakes while the other CEO only makes mistakes? One wouldn’t think it was even possible for that to happen.
I guess it’s true how Wall Street expects companies to perform in a certain way and if it doesn’t the company then becomes doomed. I don’t quite understand any of it. To me, Apple fundamentally appears as a growing, highly profitable company with a solid customer base. It doesn’t have the trappings of a supposedly failing company. I would say it’s at least equal to Amazon in every respect and certainly better than Microsoft or Google/Alphabet. I suppose that’s my failing for liking a company I think has a solid future while big investors don’t see it that way.
There is a reason for everything, as Apple rakes up billion-of-dollars of profits in every quarters with a mountain of cash hoarding forward. However, Wall Street perceives Apple as a failures, endlessly spreading FUD about Apple. God knows exactly what it is. Apple needs to find out WHY that is?.
A good informed article discussing the divide between APPL and Apple inc., but why doesn’t everyone just chill out!
One of the main reasons APPL has seen a decline in 2015 is that hedge funds have been forced to extracate themselves from positions in APPL to cover their disasterous bets elsewhere, particularly in Oil.
Wall Street will come back to APPL, once they see that the money machine keeps rolling (what’s interesting is that most Wall Street folk are also fully entrenched in Apple inc. products for themselves, their families and friends, so they fully understand the preeminence of Apple inc.).
In the meantime, long term investors should just chill out and listen to some old David Bowie music!!
Why hedge funds have been forced to extricate from position in AAPL, but not with the others like (Google, Amazon, Facebook, Netflix). Also the constantly FUD of Apple bashing on daily basic?. Why Why Why?.
” … losing sight of the hockey puck and not knowing where it is headed”
As long as Tim Cook has the stick in his hands, NOTHING IS GOING TO CHANGE. All other analysis is a complete waste of time.
Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” to state of the economy, let alone the state of any company represented.
For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.
If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.
Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way.
Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is simply the ability to predict what other traders might do before they do it.
I’ll get off my soap-box, now.
So wallstreet has a crystal ball?
Nope!
What walstreet has is a manipulation machine.. Through control Of media.. (propaganda , rumors, fearmongering.. ) And through access to massive cash to creat momentum in one or the other direction……. Plus some are actually smart there … But most are charlatans.
The only thing they care about is accumulation of more money at any cost…. Its a selfish greedy and ruthless game…
But in long run… Stock rides on its fundimentals..
Looking at Apple in the last 15 years.. WS has not realy been unkind to Apple… Has it?
But looking at the stock in shorter timeframes .. There have been massive malipulatins !
Apples stock market decline is part of a bigger problem, we are seeing a repeat of 2008!!! The Market is about to crash
http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-everything-as-deflationary-crisis-nears.html
Apple does not need to reinvent itself..
Apple has to just do what it does best even Better.
Look at where it has come since 2002 … Wallstreet has not been all that nadty has it? Except in the last couple years and a few occasions here and there.
Wallstreet is the charlatans playground , manipulations are the short run games ….In long run Stock catches up with fundamentals
Apple and aapl become the same … Imho
So glad it took an article to inform people that:
“There are two Apples: AAPL, the stock, and Apple, the company,” Neil Cybart writes for Above Avalon.
We’ve been pointing that out here at MDN for YEARS. Of course, only recently did it become blatantly obvious that the value of AAPL, the WallNut Street stock ticker, had NOTHING-AT-ALL to do with the value of Apple the company.
Its all about PROFIT. There is nothing logical about Stock Market. That’s why there is money to be made both ways Up or Down.