“Imagine if shares of Apple, which currently fetch about $345, were to increase by 30%, to $450. Apple’s stock-market value would then surpass ExxonMobil’s, making it the most valuable company on earth,” Tiernan Ray reports for Barron’s. “I say imagine because it’s rather fantastic to think of a consumer electronics company pushing aside a company with oil, and because it’s hard to imagine Apple’s shares going anywhere these days.”
“The stock is up about 7% this year, just even with the Dow Jones Industrial Average—hardly what one would expect for a company that created a new market overnight, the tablet computer craze, with its iPad business expected by some to be worth $17 billion this year,” Ray reports. “That’s $17 billion in revenue, out of thin air.”
“Moreover, backing out cash and marketable securities of $60 billion, or $64 per share, Apple shares aren’t just cheaper than the S&P, they’re bizarrely cheaper,” Ray reports. “It trades at 11 to 12 times this year’s projected earnings per share, versus the S&P’s average of 14 times, despite EPS growth projected at 52% this year by analysts.”
Ray reports, “In fact, there is a plausible path to seeing the shares rise into the ExxonMobil neighborhood, but it is the awesome scale of Apple that lately seems to sharpen for some investors all the things that could go wrong.”
Read more in the full article here.
like what?
I had read that article on Barron’s site and it’s interesting. I also don’t understand why Apple shares are as weak as they are for creating or recreating the tablet industry. Investors and Wall Street are not impressed at all. Over the last month, Apple seems to have hit some wall. Why would a stock with so much upside be that weak. I’m not concerned about whether Apple catches XOM or not, but I think Apple shares should be doing better than they are now. It’s a stock with some weird behavior considering revenue is growing consistently and that Apple is totally disrupting the computer industry and most of its rivals. Frankly, I’m nervous that Apple shares have hit a permanent wall. I’m anxious to see what the stock does on earnings. If it drops, I’ll be flummoxed. Maybe I’m just expecting too much from lofty target prices.
You’re right to be flummoxed.
Despite more than a decade of stellar upward mobility to 12x the market cap of Dell, for example, Wall Street and its core analysts are still having a hard time trusting that Apple is the real deal after its bizarre excesses and frequent near-death experiences of the 80s and early 90s. They don’t understand its current merics because they are so fantastic. In their experience, all companies that become huge, must stumble and fall. Apple has got things so right, so often for say 10 years, these powerful naysayers are convinced that something just has to go badly wrong rsn.
They’re wrong of course. Even if Goofle ends up owning the world, Apple will skim all the cream that’s there for the taking. Since its share of its main markets is tiny as in less than 10% (except for iPods which are pretty much redundant in an iPod Touch/iPhone/iPad world), Apple has enormous headroom to grow its high profit take in IT. It hardly faces any threats – even from HP.
Sensible (informed) observers know that Apple is currently undervalued based on its P/E ratio (adjusted to remove the cash factor) and its ongoing growth levels in excess of 50% per annum. Even today, based on a corrected P/E, Apple should be worth about 20 to 25% more than it is now. The trouble is that the market has its many anxieties about Apple n the medium-term, hence the price is depressed by about 20% or more. Anxieties include the health of SJ and fears of that fumble, stumble or fall.
Apple is playing in the big leagues and every competitor in the IT and CES sectors is gunning to bring it down.
I’m holding on to my shares at least till they hit $500.
One of the reasons Apple gets no respect from the Street is because they are a computer/electronics company. They sell products that can’t compete with food, shelter, and all the other basic necessities of life.
They sell the things people buy after they’ve satisfied Maslows’ needs.
The lesson being learned by the Street and all the rich people of the world is, even the poor, who can’t even cover all of Maslow’s basics, want to be entertained while being miserable.
Apple gets me through times of no money,
better than money gets me through times of no Apple. — G4Dualie
Don’t forget to credit Fat Freddie Phreak (Gilbert Shelton) for paraphrasing “Dope will get you through times of no money, better than money will get you through times of no dope” 🙂
You’re not crazy! All of these so called “analysts” speculate AAPL as uncertain, when secretly they’re heavily invested in the said stock. You’re right to be skeptical about the Q-revenue call coming up also. They’ll definitely break more revenue records for the company. Analysts know this & abuse their positions to take advantage of these major upswings the stock will definitely experience.
Correction. Apple didn’t start a “tablet computer craze,” it started an iPad craze. If it were a tablet computer craze, people would be snatching up the Xoom because of iPad 2 shortages; but, that’s far from bring the case. People want iPads. Period.
They are afraid of APPL, it just seems too incredibly great to be true – no debt, massive cash hoard, incredible sustained growth rate, great margins, online and best of class brick-and-mortar retail stores – when will the fantasy come crashing down?
After all of the .com speculation in the late 1990s for companies that were often producing little revenue and no profits, you would think that a company like Apple would gain a stronger following.
Apple is going nowhere. They should sell everything and give the money back to the shareholders.
And Apple still has so much room to grow.
In every market they’re in Apple has either a tiny share, or the market is just at the beginning of a large growth phase (remember that one day — eventually — every person on earth will have some sort of smartphone).
Then imagine the markets they can dominate with the right mix of their existing technology and a bunch of good design. (TV?)
“Your mind tricks will not work on me, Barrons.” The market is run by and for people who make boatloads of money by shifting other people’s money around. The small investor is merely a snack for them. Reminds me of the old saying,
Meddle not in the affairs of dragons, for you are crunchy and taste good with ketchup.
That is an awesome quote!!
In Apple’s favor:
Great profit margins
Great current products
Fantastic public recognition
Success in emerging markets like China
Huge cash base
Apple negatives:
FUD over Jobs health
FUD over new product release
Potential supply issues (this could be real)
Overall, Apple is in a fantastic position. Both financially and with its product line.
What the brokers don’t realize is that Apple have 4-5 year development programs. Even if Jobs was to disappear, his influence would exist for over a half a decade because of the programs already in development.
Apple are also seeing growth in all their product segments. 10 years ago they were selling only 1M macs a quarter. Now that number is approaching 4M.
They have 5-8% of the mobile phone market (Jobs goal was 1% in the first year).
The iPad is a phenomenal success and far outreaches anyone’s expectations.
The AppleTV is a growing sleeper that may drive revenue for online video.
iTunes continues to grow and dominate the music industry.
No company has the success of Apple. Instead of providing support for stock proice growth it allows the brokers to play their games. They can manipulate the stock with very little risk since they know the company is extremely stable.
If one real risk exists it could be loss of Apple’s profit margin. This does not seem to be a problem because no one seems to be able to compete with Apple on price for similar products. Apple have been able to capitalize on economics of scale extremely well to stay ahead of the competition.
@ G4 Dualie
“Apple gets me through times of no money,
better than money gets me through times of no Apple. “— G4Dualie
I like that!
This feels like a time of transition for Apple. I don’t expect SJ to return to day to day operations. I expect other major movers to leave over the next 6 months to work on their own projects. I am waiting for clarity on what’s going on and what’s next before I put my money back in.
For many years, the wisdom of analysts, brokers, pundits, and experts has ever focused of “all the things that could go wrong” with AAPL. But they consistently miss the real story that Apple has the vision, talent, and integrity to make things go right.
Would you guys PLEASE stop telling Exxon what is about to transpire? Around where I live they keep JACKING up the gas prices so they can stay ahead of Apple and I’m fracking SICK OF IT!!!! 😉
It’s not that the market movers don’t understand what’s happening. They understand exactly what’s happening. What we’re seeing now is just manipulation, which they’ve used before on this stock to capture massive profits. Once the last frightened private party sells, the institutions will shoot this stock up to the stars.
This is what is dumb about all this. Apple has stubbled in the past. They have had issues with products that they have swiftly addresses. So, it’s not a matter of not making mistakes, it’s a matter of fixing them.
The first iMac, the one with the G5 processor was a dud. It would overheat and die a premature death. I believe this, and the fact that they could not get a mobility G5 processor prompted Apple in to making the switch to Intel. So yes, Apple has had it’s issues, but they fix them fast and efficiently.