“Ostensibly, investors put their money into a company – an investment – in the hopes that the management team will create and sell products and services which deliver growing revenue and profits which, in turn, increase the value of the company and its stock,” Kate MacKenzie writes for Mac360. “If that’s how you think it works you’d be wrong.”
“As of today Alphabet, Google’s parent company, is sneaking up behind Apple Inc to become the world’s most valuable technology company (or, put another way, the most valuable company in the world). The company is no longer Google. It’s Alphabet, a clever name for a company that has one product of significance. Google,” MacKenzie writes. “GOOGL has grown in value since the name change because, you know, perception is reality. Meanwhile, AAPL has suffered in the past year because, you know, gloom and doom. Unfortunately, the stock market is rigged sufficiently that emotion drives stock more than facts and figures.”
“How can GOOGL, a company with little diversification and a single product that is floundering at a base level be more valuable than a technology gadget maker with over a billion very loyal customers, a company whose products own the premium and profitable end of every business segment?” MacKenzie writes. “If it defies logic and reason then there must be manipulation going on behind the scenes with market forces greater than the obvious. If that’s the case then the market is rigged.”
Read more in the full article here.
MacDailyNews Take: The market craves GROWTH (iPhone unit sales growth, in particular). Until Apple can promise/show growth, all bets are off.
SEE ALSO:
Apple could soon lose its place as world’s most valuable company to Google – January 13, 2016
Apple regains ‘World’s Most Valuable Company’ crown – August 1, 2013
Apple overtakes Exxon Mobil as world’s most valuable company – August 9, 2011
WTF are you talking about, MDN??? Quarter after quarter of increased profits IS growth!!!
“We do think that iPhone units will decline in the quarter.” — Tim Cook, speaking of Q216 during Q116 conference call
That is not growth.
Until this quarter, when was the last time profits declined? How does that justify AAPL’s valuation and multiple?
“Will” signifies something that hasn’t happened it.
The market wants GROWTH. Again: the market wants GROWTH!
What happened in the past apparently has absolutely no relevance whatsoever. There was a time when RIM (now Blackberry) had market dominance and quarter-to-quarter growth and record revenue/profit. We all know how that turned out; the moment RIM could no longer forecast future growth, the stock was decimated.
The only way to interpret the Wall Street insanity related to AAPL and GOOG is that the Wall Street simply doesn’t see Apple growing their business for the next five years, while they believe that GOOG still has unlimited potential, with large swaths of the developing world (sub-Saharan Africa, China, etc) coming online and becoming Google customers (= products for sale to advertisers). They simply don’t see Apple ever inventing anything else, or breaking into any new markets again.
Steve Jobs said, exactly 20 years ago: “…I would milk the Macintosh for all it’s worth — and get busy on the next great thing. The PC wars are over. Done. Microsoft won.”… If Apple continues to live and operate on this premise (and it did during Jobs’s life), then Wall Street clearly doesn’t know that.
Years of growth did nothing for AAPL’s multiple.
I am not sure what stock you’re looking at; when I look at AAPL and click ’10 years’, I see AAPL going from $7 to $130 (split-adjusted). An all-time high was hit sometime last summer.
In other words, years of growth had AAPL stock grow almost 20-fold. If you are a long AAPL investor, you are likely quite happy with your return and not too worried about the current slump.
Look at the last 3 years. Apple has grown as a company and grown as sales. But the stock price seems to just bounce and go down.
Growth of growth… acceleration.
If Apple does not grow the percent of growth, then its doomed.
If Apple does not forecast more for next quarter then its doomed.
If Apple does not tell you how it will rule the world (ha ha ha ha said maniacally ) its doomed.
PS forecasting better things is better than growth. Just ask Amazon. LOL.
Minus cash, they are trading at 6.4x earnings. No, I’m not happy about that. Especially when compared to companies like Amazon and Netflix.
I totally get you, but all I’m saying is, Wall Street has logic about it and, while the logic may be twisted, it is fairly consistent.
Netflix just expanded into 100+ countries around the world. Many of them are developing nations or economies in transition, where piracy and torrents are the overwhelmingly dominant method of consuming media (especially US-generated). In other words, while at first, those markets will yield little change to Netflix (growth in the developed world will be much more significant factor), they present potentially a massive and seemingly endless growth, for a service which is in its infancy (i.e. where Apple was ten years ago, just before launching the iPhone).
As for Amazon, there is no logic, rhyme or reason for that one; not even for Wall Street’s twisted kind.
So…
Apple had growth (year over year) for calendar 2015 quarters 1, 2, 3, and 4. Yet from mid calendar quarter one 2015 and on the stock, on average, slid significantly. How does that explain that growth drives the stock price?
Hint: it does not.
Lack of growth might explain the last couple of weeks (or maybe even the last few weeks). It does NOT explain the last year.
Here’s an idea…
Taxation of profits in the stock market should be tied to the book value of the company. If the book value doubles and the stock price doubles and you sell your stock there is virtually no tax on that sale. If the book value of the company stagnates and the stock price triples then the profits should be taxed just like gambling winnings (or maybe even higher) — after all the profits are pure speculation profits.
Of course, it will all come down to how the taxing authority defines “book value”. Do they include all earnings or just retained earnings. Do they include some amount of “good will value” (which would help Apple but kill Comcast). But, governments need to find some way to tie stock valuations to company performance or it’s 1929 all over again in the NOT TOO DISTANT future.
Right now the stock market is worse than a gambling house. It is controlled by the big investors AND by the money houses that need to get people to buy or sell in the last weeks of a quarter in order to bump up there fees thus you get lots and lots of “reports” claiming you need to buy this or sell that on rumors and speculation those houses have made up themselves.
Will such a change happen in the foreseeable future? I’d be pleasantly SHOCKED if it did. There’s too much money being made in controlling the market and running it the way it is.
Note: Apple has been a “rolling stock” since the late 80s. I don’t expect that to change, but when the company’s fundamentals are good and the stock drops by 25% over the course of a year, then there is something inherently wrong with the system.
Growth is great but not everything.. Consistency in generating profit is also a very important metric.
Just imagine apple addin 18billion to their pile of cash every quarter. In a few years its cash is going to be more than the its cap value ! …… Is growth the only important thing?
Wall Street wants the APPEARANCE of growth. If they perceive growth they buy like crazy…until they don’t. The “market” (not to be confused with Wall St.) honors investment, innovation, and growth – all of cannot be perceived by a very blind Wall St. The street sees Savings & Loans, dot-com, sub-prime, China, etc. as “they’ll never go down”, until they crash and burn to the sound of gnashing teeth. Microsoft was an investment COLOSSUS, until it wasn’t. Just repeat at the beginning and end of each trading day “this to shall pass.”
Oh, and MDN has been a whiney investor since forever 😉
Nobody wants to even conceive an Apple future with the incompetent gay activist embroiled in it!
Tim Cook has done enough damage to Apple and it’s way time for him to go.
For all you delusional Tim Cook cheerleaders… lies make us feel good, but it’s the truth, that’s the one that hurts!
Endless growth is not possible and never will be.
I guess Apple needs to change it’s name to “FRUIT” so that these gambling investors will have something to invest .
It’s the writing on the wall, in brite rainbow color.
Lousy updates to increasingly bad software.
Instability where there was stability.
Agenda, agenda, agenda.
No new monitors to support the laptops (Air and the LED displays)
No 5k display
Server is a joke that belongs in a trash can.
Watch is just a POS without an iPhone.
But still, I would not buy any other product in Apple’s category.
Just wish Apple would spend the money in the right place, blow a lot of sunshine up the consumer’s butt. That would do the trick.
Growth is one thing, but Apple grow more than other companies consistently. The simple fact is that other companies get a pass that Apple don’t.
The market is so screwed up it is not even funny. Yes, as an investor you do want growth. However, the morons on wall street must have missed all of the equity valuation classes in business school, since the future value of any company is based on the expected stream of future PROFITS, not top line sales or cash flow. Any moron can build a giant business that sells their product or service below costs and loses money.
The problem is that for the last 20 years wall street has been acting like venture capital companies and buying equities betting that a loss making company will be profitable in the future even when there is absolutely no evidence that it will be. It used to be that companies had to be profitable before going public.
Now wall street is purely about MOMENTUM, which is to say a pyramid scheme where the stock value has nothing to do with making a profit. Wall street picks a few companies to talk up, and everyone piles in hoping there is a greater fool who they can sell to at a higher price the next day.
“The market craves GROWTH”
Actually, no. So-called “analysts” say they want growth. And then they call a decrease in the rate of growth to be no growth or even negative growth. If it was 3% and then went to 2%, that is still 2% growth.
The truth is we live in a world of math illiterates or, to quote Barbie, “math is so hard.”
People, you’ve got it all wrong. The market craves growth from a growth company. Apple USED to be a growth company, but it’s SO big that it’s hard to keep growing at ever greater rates (when you’re small and have no market share, it’s easy to grow in leaps and bounds but when you’re large it’s much harder to sustain large growth). Also, don’t mistake growth for profitable. Apple’s REALLY profitable, but it’s growth is slowing because it’s become so large.
The solution for the stock is to change the mindset from a growth company to a value company. If Apple increased it’s dividend significantly, people would invest in droves because it would be an amazing return on investment.
The market looks at the profits of a value company and the growth of the growth company. It’s time Apple becomes a value company…
I’d like to add that I agree with tpmchugh: it’s not that Apple isn’t growing, it’s that its growth is slowing or contracting. Again, increase the dividends and no one will care what the growth rate is- only how much money they make and give back to the investors…
Investors put their money into a stock with the expectaion that the stock’s value will rise before that owns sells the stock. How it gains price is irrelevant to what the company actually does.
Maybe Apple needs to split into the parent company with a multitude of smaller companies under it. As was said earlier, Friute, owns Apple. Car development goes to Pineapple. iTunes becomes Apple Media, Apple becomes Apple Computers again, etc.
They already run as non-communicating teams. So why not make it official.
Simply brainstorming here.
When has the market ever been right about Apple? Back in the Steve Jobs era they used to talk down the company constantly. It was only when the upswing became apparent to absolutely everyone that Wall St. caught up with what was happening.
Why would the Cook era be any different?
And why does it matter if Google has a bigger market cap anyway? Let Wall St. pump and dump their stock. Apple should concentrate on making the gadgets and software people want to use, like they’ve always done.
Right on target! This person gets it right in the bullseye!!!!
Rigged market is the greatest definition of what’s going on today period!
If the market is corrupt the government is complicit and there is nothing to be done. Your wailing will solve nothing. Time to pack up the wife and kids, move to Montana, plant a garden, and live off the grid.
Incredible. The doomsayers will NEVER stop. Back in the 90’s (when Apple was profitable but oh-so-small and vulnerable) to Jobs’ return and turnaround in the 2000’s till now. The company with the world’s largest profits is STILL “doomed”!
Rigged indeed.
Apple Music and Apple TV are the 2016 game changers. The iPhone 7 is irresistible before we even know anything about it. I cannot predict when AAPL is going to take off, but there’s going to be a good run this year.
It’s not really so complicated. When things consistently don’t make sense, when problems don’t get solved and issues seemingly persist or grow regardless of professed good intentions, you know the real intent behind it all is that have be exactly as it is… Follow the money: who’s benefiting and profiting from the “system”?… Yes, it is rigged. Everybody with open eyes can see. The question is, how, when will it change? Who can change this? Etc, etc, etc… It’s a predicament that is becoming more and more glaring and obvious – just listen to the current crop of would be presidents… I’m optimistic that change will come eventually.