Goldman: Buy Apple on investor unease

“Apple’s listless share price could present a gilt-edged buying buying opportunity for investors, according to Goldman Sachs, which says that recent concerns about the company’s upside are overstated,” James Rogers reports for TheStreet. “‘We continue to believe the current valuation represents a remarkably attractive buying opportunity,’ explained Goldman analyst Bill Shope, in a note released on Monday. ‘We would be aggressive buyers of Apple’s stock.'”

‘Apple has given little indication of its iPhone 5 launch plans although it has confirmed that its June Worldwide Developers’ Conference, typically the launch pad for new hardware, will focus on its iOS and Mac operating systems. Set against this backdrop, there has been speculation that the iPhone 5 may not appear until the fall,” Rogers reports. “Goldman’s Shope, however, thinks that investors should not lose too much sleep about this issue, particularly at a time when iPhone sales are going through the roof.”

Read more in the full article here.

28 Comments

  1. Yeahbut:
    – Can icloud work and make much difference?

    -Will the next iPhone be more than a slimmer, bit quickeriPhone 4 ( what’s the value proposition to buy up?)

    – How does Lion make a difference to my day-to-day computing? How will it sell more Macs?

    – What is SJ’s health? (The fortune article only magnifies confidence in the belief that SJ is the power behind all Apple decisions. Him leaving would kill your investment short-term).

    – What’s coming that’s exciting that’ll boost the value in ways we’ve become used to — 100%, 200%, 300%?

    – What about Greece, Ireland, Portugal, US persistent unemployment, housing prices still falling in the US now for 57 consecutive months (Zillow)?

    – Mounting US debt and a political system more interested in scoring points than solving problems, much less leading to resolve problems before they become disasters?

    — These things and more (add your own) have many of us on the sidelines watching and wondering instead of investing.

    1. Uhm, Apple is going to make $26 to $27 a share this year, and about $25,000,000,000. I think that pretty much trumps all of your concerns.

      iCloud is not priced into the stock, so there’s no downside. Regardless of what the next iPhone brings, nothing is slowing iPhone sales, which more than doubled last quarter from a year ago. Like iCloud, Lion is not priced into the stock. As for Steve, Apple’s stock price is already heavily discounted, which presumably is partly due to Steve’s health. If you fear any short-term downside, then perhaps you aren’t an investor, but a trader. Investors should take a long-term view. Nothing needs to come to “boost the value”. Apple has plenty of room to grow in the markets it is currently in. Did I point out already that they are on pace for over $100M in sales, $25B in profits and $26 to $27 in earnings per share? A stock price of $348 is seriously cheap right now. Yes, the macroeconomic situation isn’t great, but we’ve already gone thru it for several years, and Apple has grown their business by a factor of 3 to 4. In 2007 sales were only $24.6B. This year, we’re looking at over $100B. US debt is not as big a problem as slow growth or lack of jobs. Having said that, a weakening currency, means that Apple will benefit from foreign sales, which make up more than half of their business.

      You, are a nervous nellie. The very best time to invest in the markets is during a recession. By the time, all of your doubts are answered to your satisfaction, the opportunity to buy cheap will be gone.

      I have more than tripled my money in Apple, since Oct of 2008. I wrote an Opinion piece here on MDN, pointing out that investors had an arbitrage opportunity in Apple. Interestingly, Apple is as cheap today, in terms of PE, as it was back then.

        1. Yes, I meant “arbitrage”. If you recall, back then, Apple was using deferred revenues to report iPhone sales. They were reporting $5 a share in earnings, when the reality was they were earning over $9 a share. I wrote an Opinion piece here on MDN, which seems to have disappeared when they changed the site’s format, which pointed that out. This was right after Apple reported earnings when Steve Jobs was on the one and only conference call. He specifically noted how the Non-GAAP data would help investors understand Apple’s true performance. A year later, the FASB changed its rule on what needed to be reported, and iPhone revenues were no longer deferred. Apple immediately adjusted its earnings to reflect the new rules, and yep, they reported, $9.06 a share in earnings.

    2. Haven’t been to an Apple Store recently have you?

      Apple has broken through to the mainstream. People are going nuts over Apple’s products. People either own an Apple gadget or want one. More importantly, once someone gets an Apple product, they want more: an iPhone purchase begets an iPad purchase, begets a Mac purchase, begets lots of iTunes useage and regular re-ups to the latest hardware. If ever a company had found the key to consumers’ hearts it’s Apple.

      The forthcoming iCloud, iOS5, and Mac OS X Lion will further distance the Apple ecosystem from the competition and continue to drive demand.

      Apple is just getting started. If you cannot see that, then you’ve got something over your eyes.

  2. This is the exact opposite advice of the authors of the book “Aftershock”, who accurately predicted the last stock market crash, the housing market crash, and the banking collapse… 2 years before it happened.

  3. I used to have a business partner who was the guy who obtained the first sales contract for forklifts with Anheuser-Busch. He became wealthy overnight. It took him 20 years to eventually lose it all. He lost it because he was perpetually sure that things were going to hell in a handbasket, and he invested accordingly. He went broke on 2 dozen different investments based on protecting his wealth from the “coming disaster” of the day, whatever it was.

    I bought Apple at $7.50 in 2003. I’ve withdrawn enough to double my salary every year and there’s still a lot of shares in that account.

    The difference between the two of us is research, attitude, and expectations. If you go courting disaster it will find you.

    1. That’s a post-split price right? Cause, my recollection of 2003, when I was looking at it, was it was about $12, with $10 being cash. The enterprise value back then was $2!

      1. Tell that to the university where my wife got her degree compliments of Apple.

        Yes, my feelings are really hurt. I cried the whole last half of April as I lounged on the lanai on Maui with a good book and a cold one and watched the sun set. I’ll be retiring this year. AAPL has been very, very good to me.

  4. On the face of it, Wall Street’s disdain for Apple stock makes little sense. Yet, for many years now, Apple’s share price lags well behind its extraordinary growth and profitability, and there can be no doubt that Apple is an extraordinarily well-run corporation.

    But the American investment community is as corrupt as all facets of American corporate life. Perhaps, to find the real reason why Apple’s share price does not reflect its real worth, one needs to look hard at those who make money by peddling stocks. Repeated calls by some for Apple to spend its cash indicates a growing irritation in the investment community at their lack of access to Apple’s cash pile – and the potential huge fees which might be earned through Mergers & Acquisitions were Apple to be persuaded to divest itself of its cash. Perhaps, too, Apple doesn’t wine and dine the lower rungs of the investment community, or the financial journalists – most of whom appear to know nothing about investment except what they are fed by their clients.

    If Apple is misunderstood, it is perhaps because Apple doesn’t play by Wall Street’s rules – rules designed to enrich themselves, often at great cost to investors.

    Also, Apple’s success often comes at great cost to more laggardly players in the industries in which Apple competes – perhaps one needs to look at those in the investment community who represent “the established order” and whose income is reduced when the Apple juggernaut eats into the profitability of their clients.

    In all aspects of American business life, one must “follow the money” in order to understand why anyone in the investment community says or does anything – well, perhaps with some rare exceptions – Mossberg in the WSJ for instance, who retains a reputation for independent, reliable, journalism. But he is rare indeed – and MDN readers will be aware that many publishers employ journalists with no integrity, who keep their jobs despite writing the most absurd things about technology.

    Apart from Mossberg, no-one really tells the truth – there is always a pitch. Across all the spectrum of American life, the truth, about anything, is hard to discern. And the more money involved, the less the truth is apparent. Anyone who believes anything anyone in American banking or politics says today is a fool…

    …which is not to say it is much better anywhere else in the world, but American business is further down that slippery road of corruption.

    Americans, however, do not seem to notice, or care. Truth is not high on the priority list for anyone today it seems – and the days are long gone when personal or corporate reputation means anything – Microsoft and Google, in particular, demonstrate that corrupt conduct goes unpunished, and perhaps largely unnoticed.

    For Apple investors, or would-be investors, it is enough to understand the corporation and the markets in which it plays. The fundamentals of the corporation are extraordinarily strong, and Apple has demonstrated that they know what they are doing, most of the time anyway. And if the share price lags a little behind its true value, so what? The share price continues to rise, and will continue to do so.

    And what of the Apple cash pile? Many of us believe a huge stockmarket crash is around the corner. Perhaps Apple subscribe to this view as well. If so, perhaps they are just waiting for a buying opportunity – taking a leaf out of Ivana Trump’s book – “Don’t get mad, get EVERYTHING…”

    1. “Many of us believe a huge stockmarket crash is around the corner…”

      Is that right? Seems a bit overstated… What do you base a statement like that on?

      1. You only need to read the financial press to understand the tidal wave which is close to rolling over international finance. I read the WSJ and The Economist as well as the NY Times, he Independent (UK) and the Australian as well as various blogs by independent commentator on the world’s economies. Hint: you won’t hear anything about this on Fox…

        Another bank crash is in the offing – Bank of America the most likely suspect to start that ball rolling again. This time, however, there is no money for bailouts. The world’s financial systems are essentially, a giant Ponzi scheme – relying on ever increasing growth to fund larger and larger levels of debt.

        Look in your own backyard – almost every level of government in the USA is bankrupt. Almost every pension scheme, corporate or government, is bankrupt.

        And then look at the great tides which are rolling over the world – the ecology is now so damaged that extreme weather is causing untold damage everywhere, with those countries affected unable to fund reconstruction without going further into debt – Japan the most recent example of this, but who will fund the cost of repairs after this year’s tornados across the USA, and what of next year’s and the year after that?

        On the ecology front, unless you have seen GASLAND you will not realise how much of the US land has been damaged by the toxic chemicals pumped underground by the gas companies – exempted by the Bush administration from all US environmental laws, and not required to even declare what toxic chemicals they are using. These chemicals are now turning up in the water supply and in grains and animals, poisoning the food you eat. Again, you won’t hear this on Fox.

        The Water across Asia is disappearing – falling as rain instead of snow in the winter and running down the rivers when the land is dormant, leaving the rivers dry in summer when water is needed for crops. The USA, too, is seeing a resurgence of the great dustbowl with warmer temperatures changing rainfall patterns and making crop production impossible in many areas.

        On the financial front, huge numbers of houses remain in limbo as the banks try to avoid foreclosure which would force them to recognise huge losses. American unemployment remains stubbornly high, with new jobs being generated predominantly at the low end of the wage scale. Government revenues are falling, services are being cancelled across the USA and government employees, including teachers, are being dismissed wholesale.

        China, the USA, and Europe are now experiencing high levels of inflation, which eats into people’s savings and forces people on marginal incomes to increase borrowings – which is generating higher levels of default, and eating into bank profits.

        Ageing populations across the world are now causing pension funds to collapse everywhere – leaving many retirees with no income at all. There are not enough well paid workers to generate enough income for the pension funds, and in any case, many governments and corporations have underfunded their funds for many years.

        The US Fed Reserve has pumped the economy full of fake money to fund the US government’s burgeoning deficit. The US is now addicted to this fake money – and if the Fed pulls the plug, as threatened, you will see the start of a stockmarket collapse. Once this starts in earnest, it will not stop.

        The other huge tidal wave which is now crashing on the shores of world economies is the long-predicted collapse of cheap oil. Saudi Arabia has now reduced their production – apparently because they no longer have sufficient reserves to conceal the decline in the production from their oil fields. Declining oil production is matched by increasing demand from India, China and other parts of Asia – and the price is rising accordingly. Since oil underpins almost every aspect of a modern economy, the sustained price increase will create enormous inflationary pressures everywhere – and, if the price does not rise fast enough, there will be shortages.

        None of these “tidal waves” should be a surprise. But the world, and particularly the US, has been lulled into a false sense of security as oil companies, oil nations, industrialists and bankers have papered over the cracks to avoid facing up to the consequences. The US has done little, if anything, to reduce its usage of oil. Most western countries are the same, though parts of Europe have created substantial green energy plants.

        The financial ponzi scheme relies on confidence. No politician, banker, industrialist or commentator is likely to say anything which will draw the attention of the US people to the underlying problems and the potential for collapse. For to do so may bring such a collapse on in short order. And while people are making money from the status quo, they will do everything they can to preserve it – but this will just make the inevitable crash more damaging.

        The assumption underlying all the world’s economies is that growth can go on forever. This ignores the fact that we live in a finite world, and have already denuded the planet of much of its natural resources, poisoned the land with oil based fertilisers and, now, fracking fluids, destroyed the world’s fish stocks, waterways and, perhaps irreversably, changed the world’s weather.

        If you don’t already know all this, you live in a bubble. But it seems to me that Americans have grown used to being able to create their own reality – shutting out anything unpleasant, and particularly anything which might require a change of behaviour or, heaven forbid, any personal sacrifice.

        And yet you will easily find incontrovertible evidence for everything I have stated here – even in your own newspapers. Your own Vice President put his huge personal prestige behind a film, “An Inconvenient Truth” but how many Americans watched it, or took it in?

        These issues are not minor fluctuations in the world’s economies – they are tidal waves, each one of which is capable of sweeping all before it. All together, they represent a total collapse of the world order.

        Right now your conservative politicians are attempting to wind back environmental laws; the wages of ordinary Americans; the requirement of corporations to adequately fund pension plans; job security; regulatory controls; independen arbiters and judges at all levels, and corporate accountability. Money is all in the USA, and Americans, and others, have lost sight of the fundamentals which underpin modern life.

        Corruption is now endemic in American life. Your supreme court has been purchased by moneyed interests; your political system, on both sides, is now funded by secret donations from those who trade financial support for legislative favours. US banks conceal their bankruptcy with the collusion of the Fed Reserve which is, in any case, the main lobby group for the banking industry. 50% of the most popular programs are on Fox – a broadcaster banned in Canada because they cannot meet Canadian legislation requiring that broadcasts be truthful.

        Were you to travel around your own nation you would find desperate communities everywhere. Many parts of the USA show statistics which might only be seen in the third world. Yesterday there was a report in the US press that 50% of the population of Detroit is functionally illiterate – people cannot read, write or understand.

        I liken it to the coyote in the roadrunner cartoons. As long as he doesn’t look down he can run on thin air. But the coyote always looks down. When Americans do the same, the crash will be on in earnest.

        Watch four documentaries: COLLAPSE (2009); An Inconvenient Truth; GASLAND; The War You Don’t See (Pilger 2011)

        1. Well, that was uplifting. I guess you are not a glass-half-full person. While I agree with much of what you say, I think that we will cope. We always do. It won’t be pretty, but we will be all right in the end.

          1. The truth is not always uplifting. And vain hope, or wishful thinking, will do nothing to change this reality.

            As for being a glass half-full person, I am indeed. I am a systems person – and for some time I have realised that until the current systems collapse it will be impossible to build something new that works.

            But that time approaches. If you have a great deal vested in the status quo it will hurt like hell. But for many people, the new way of life will be welcome.

            In Collapse, it is pointed out that the world’s population grew from around 1 billion people to more than 6.5 billion people after the discovery and industrialisation of oil. As oil disappears, the world will no longer be able to support this level of population. In the wild, a species will grow to take advantage of the available resources – when they collapse, the population of the species does as well.

            The potential loss of 5.5billion people from the world is a sobering thought. And if you this far-fetched, look around and see how much of what we do, and especially how much of the food we grow, is dependent on oil. Even the fertilisers used are mostly derived from oil, and of course the harvesting and transport is totally dependent on oil.

            If you are alive today you will experience at least the beginning of this collapse.

  5. Given all this (which I agree with but don’t know how to adjust to) can you say how you suggest investing over the short and long term? And what’s your hunch about a timeline for the coming crash?

    1. The last part is the easiest to answer – the crash is already here, but fake money and accounting tricks by the banks conceals the underlying problems. The descent into madness will come unexpectedly – large jolts to the system will expose the cracks and confidence will fall. Natural disasters, bankruptcies in the banking and insurance industries, and the failure of state and regional governments will create further fissures. Its hard to say how long it will take – it depends where, and when, these jolts occur. There are so many disasters waiting to happen…

      How to protect yourself? LOL – you ask about investing? The issue will not be how to invest, but how to feed yourself. Where does your food come from?

      Watch those documentaries. Move your money into portable precious metals. Move to a warm part of the country not yet destroyed by fracking. Grow your own food. Collect firewood. Keep chickens.

      Inform yourself. Observe. Notice.

      The USA will be hit harder than most countries because the US people are so much further removed from the land than most countries. But your country people know the land – go and be with them.

      1. I agree that all of this will happen… Unless it doesn’t. Doesn’t every age have it’s worst case scenario that could happen but doesnt? Surely in the midst of the cold war most people thought a nuclear bomb would have been detonated in war before 2011, but it didn’t.

        I guess on some level I think that people’s fascination with COLLAPSE makes the collapse more likely. We have amazing resources now that people in no other age have had — education, perspective, R&D, tools of all kinds, communication and the like.

        So in every case that a major event threatens to begin a collapse, it seems to me that people will marshal their resources to stop the momentum.

        It’s less thrilling to conceive of, but more likely, in my opinion — I’m paid to think about these things — that a few discontinuous changes lead to a few awakenings and, with our butts in gear, we fix the problems and set the course for another generation of progress.

  6. its not a problem of knowing what to do, but with the will to do it. The world has known for a generation that oil was going to run out eventually, and more or less when supplies would begin to decline. US gas is now $4 gallon but you are still buying trucks and no-one is building public transport. The very kind of wishful thinking that you demonstrate has persuaded Americans that no change was necessary. Now it is too late. Far too late. Whistling Dixie might be fun, but it ain’t going to change the outcome. America is insolvent. As is the rest of the world. You can put a finger in the dyke but it won’t be much use against this tidal wave.

      1. Thank you for your reply. I have always admired the capacity of Americans to maintain standards of politeness uncommon in much of the world today. However, I would be even more gratified if you undertook to do a little research on the issue and I would be happy to debate this further with you offline – debate, under such circumstances, undertaken with civility and an open mind, encourages the discovery of truth – which is, surely, the ultimate goal of anyone likely to be affected by the problems and issues we are discussing.

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