The power of Apple

Apple Store“John Galt,” writing for Seeking Alpha, explores “The Power of Apple.”

iTunes helped put the Music store out of business: The simplicity and convenience of itunes helped bring the music industry to it’s [sic] knees.

MacDailyNews Take: The music industry brought the music industry to its knees due to greed and inability to adapt to change rapidly enough. That it’s still able to kneel, is thanks purely to Apple Inc. and Steve Jobs.

• iPods won the MP3 Race: The iPod dominates the market with an estimated over 90% market share. The prices of ipods are already going down, and the race was easily won by Apple. Nobody has a Zune.

• iPhones changed the game: All other smart phones are just impostors… Let’s face it, all of these other Palm, Motorola, LG, HTC, Nokia, Google phones are just impostors. Apple is cool, user friendly, convenient, easy to use, and has that “it” factor. All of these other phones are just knock off of iPhones.

• Apple Macs continue to sell due to high customer satisfaction and a loyal fan base: A wise man once told me that over the long run in business you are better off selling the best quality product for more money than selling an average product for a fair or even cheap price.

• The iPad will be a game changer: The last big things at Apple (iPod and iPhone) were smashing successes that lived up to the hype and that bodes well for the iPad. I remember the couple of days after Apple unveiled the iPad you’d see strangers on the elevator talking about the iPad instead of the weather.

• The iPad will help put bookstores out of business: iTunes and the iPod helped put music stores out of business, and I believe the iPad will help put the bookstore out of business within 5 to 10 years. These bookstores are sitting ducks, at least in their current form, much like the music stores were 10 years ago. They are big, take up a lot of space, and their books are more expensive than Amazon mailings, a Kindle or soon to be iPad.

Changing Newspaper industry: Newspapers are currently on the ropes as well but they are in the process of changing forms.

• Cannibalization & new niche markets: The iPad will lead to new “niche” markets. In all reality the iPad will cannibalize some existing iTouch and laptop sales ( estimated 15%), but I believe it will also bring new people to the market and better serve customers.

• iAd: An advertising platform for Apps on mobile devices that will bring in hundreds of millions of dollars within a few years. Not only is Apple creating homerun products, but they are in the process of creating a residual income stream off of those products.

Apple is an innovator: Apple didn’t invent the computer, MP3 player, smart phone, or even the tablet. Steve Jobs took an existing product, saw the potential and made it “his” in much the same way Henry Ford did with early cars.

• Explosive Earnings Growth: From 0.37 in 2004 to an estimated 15.19 in 2012!

• Valuation: Over the last 5 years Apple has historically traded between 65x and 16x earnings and is now at 20x earnings. The company is bigger than it was 5 years ago so I don’t see them trading at 60x earnings but let’s say they went to 25x earnings or 30x earnings which is reasonable for a big growing company. That would put the stock in the 300-350 rage, the 350-400 range next year, and the 375-455 range in 2012.

“Galt” writes, “Apple has changed the way we think about music, movies, telephone, games, internet, and computing just by improving and optimizing existing products and making them their own. They have the power to be a dominant overall media provider in the near future.”

“Galt” writes, “Apple is exactly what Corporate America and this country as a whole needs. They demonstrate financial prudence by carrying no long term debt, have tens of billions in cash, they make products that people in other countries want ( they export stuff) and they represent American innovation and creativity. As a freedom-loving American, I am proud of the company Apple and I own their stock.”

Full article here.

87 Comments

  1. You’re overreacting to point 1 MDN. He just said iTunes “helped” bring the music store to its knees — i.e, was a factor, not the SOLE cause. Hard to argue that iTunes didn’t contribute to the demise of the independent music store. No one is arguing that the greedy music publishers weren’t also a factor, maybe the major factor.

  2. “Obama bringing glory back to this country”???

    You’re kidding!

    In 2 years, you’ll be in a long line to buy meat, and there will be no steak. Just a few pounds of sausage.

    You must like socialism, or Marxism.

  3. @G Spank,
    Even folks like you will see what a disaster Obama is by 2013. That’s how long it took with Carter, it wasn’t until 1979 that just about everyone got it.

  4. @ @G Spank,

    Yeah, let’s rid ourselves of ‘socialism’ in our country – close all public libraries, make all streets/highways into toll roads, get rid of all city services, e.g., water, sewage treatment, refuse disposal, city pools, tennis courts, parks, police, fire departments, etc. Let’s show ’em how things are done in ‘Rand’y Land.
    ___

    Apple’s hitting on all 12 cylinders!

  5. Couple of problems with that analogy, Original Jake:

    1) Obama is a far better politician than Carter could ever hope to be.

    2) Carter was in the midst of a downturn when running for re-election while Obama will have the fortune of running as the economy goes on an upswing. In that sense he’s closer to Reagan politically in 1984 than Carter in 80.

    3) Speaking of Reagan, Republicans don’t have another Ronald Reagan.

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