Michael Holland on Apple: ‘These are crazy numbers’

“On Bloomberg TV, the head of Holland & Co. joins the chorus mystified by AAPL’s valuation,” Philip Elmer-DeWitt reports for Fortune.

Michael Holland can’t believe Apple (AAPL) is selling for 11 times next year’s earnings,” P.E.D. reports. “‘Take just the most simple metric for most of the viewers. They understand the price/ earnings multiple. The price you’re paying for this year’s earnings and next year’s earnings. We’re talking 13 and 11. It’s crazy. Those numbers are below even the most pessimistic growth rates for the near future.'”

See the video in the full article here.

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]

53 Comments

    1. It means AAPl is excessively cheap by many standards. The untrained see 320+ per share and think wow that’s expensive. It’s not. the lower the P/E the more of a good deal a stock is, provided of course some of the other fundamentals are sound.

      For a company like Apple, that really still has tons of room for growth in both the domestic and international PC markets, this P/E is sickeningly low.

      The only explanations can be manipulation on a massive scale, or just the market’s overall fear of the global economic situation.

    2. Well, an analist is one who spends his days at the orifice generating large piles of steaming opinion. :o)

      Seriously, as a non-analyst, my take is surely simplistic, but here’s where I go. I have a hunch lots of folks are waiting to see what happens with Jobs’ health. Those who really don’t understand Apple would imagine it would never survive without him (and are ignorant of how well positioned Apple is but can be forgiven to respecting his influence too much). Those who really DO know Apple have decent reason to wait for the possibility of a stock crash upon his departure and buy AAPL on the cheap, knowing, with its amazing team and products, it’ll come roaring back.

      So the only ones left holding it are a) those who think his health isn’t a real concern just yet; and b) those who are such die-hard long-term thinkers as to be willing to ride out the likely (if temporary) storm. I guess I’m a little of both, but even as a huge AAPL fan (of company, product, and stock) I dare say I get nervous that I should sell and buy back in at the bottom. At this ridiculous rate of negative-growth in the stock and the lack of certainty about him, what reason is there to stay? Why not come back later and ride it up?

      (Really, I’m asking. What keeps you all hanging in? Educate me.)

    1. Unlikely Soros or Koch, although those two names get thrown about quite easily since it’s much simpler to blame it on one person.

      If anything it would more than likely be a larger financial institution like Goldman Sachs, or someone like it.

  1. Shorting AAPL for the next few weeks to months is a good bet.

    One thing is for sure, the P/E ratios and other indicators investors used to determine a company’s stock valuation don’t **seem** to be as indicative of reality as they used to be, especially with this stock in particular and the fact that day trading option calls and puts is available to those with the stomach for it.

  2. My brother day trades option puts on AAPL and made 20% today alone on the drop in the stock’s price.

    I personally don’t think betting a stock will go down is right and it shouldn’t be allowed. Seems like it’s completely rooted in greed if you ask me.

    1. Options are very useful market instruments. I think you should educate yourself better on the subject before you pass judgement. Without options a lot of US farmers would have been out of business long ago. Market forces will eventually prevail for Apple stock holders. For those of us with little capital it gives us a better chance to control larger amounts of Apple stock than we world otherwise be able to afford.

      1. useful market instruments to trash a stock, spread rumors about Steve Jobs being dead and putting companies like Circuit City out of business, by ” those of us with little capital,”

      2. “better chance to control larger amounts of Apple stock than we world otherwise be able to afford”

        i think you have exactly nailed it why options are more bad than good. thank you for explaining that so clearly.

  3. there is no doubt that aapl is undervalued. Companies with way lower growth rates have PEs which are higher.

    that said Apple should work harder to boost the stock price and help it’s investors. (Steve Jobs with his $1 a year salary and no stock options since 2003 seems rather disinterested in the stock price and apple resolves around his direction)

    what should apple do?

    1) give divedends. for the stock to go up there has be INVESTORS who are willing to buy the stock (Apple is a big company and many investors are needed to move the price up). Giving divendeds will help aapl be included in hundreds of dividend yield mutual funds thus widening the market. Also some invidual investors especially with aging population and the recession won’t buy stock unless they provide dividends (some older people want to live off yield).

    2) stock split. this is psychological as it off course doesn’t materially change the value of the company. But lots of people seem to be put off by the $300+ price

    3) Apple needs to do more PR to investors. I’m so tired of people including investors having wrong beliefs. During the WWDC I cringed when a news anchor started his report by saying “Even as Android is rapidly overtaking iOS in the marketplace apple is making an attempt at WWDC…. etc”. Don’t assume that big investors like mutual fund managers with hundreds of millions under their control understand tech. One common belief is that android is killing Apple and apple will end up like Mac vs Pc in the 90s, few know that Apple makes at least 50 times more money off mobile than Google. Worries of Jobs succession plan, android etc is freezing aapl. Apple should continuously explain and reassure investors and these issues.

    Apple is like a great artist who says “I don’t need to explain myself. My art speaks for itself”. Well if Apple keeps like that clueless fund managers and other investors who don’t understand the art ain’t going to buy.

    I love Apple products and my aapl has done well the last few years but now Apple needs to do more to help its investors.

    1. Interesting use of the word “should”.

      1) Apple is not interested in giving dividends. /points to MSFT listing.

      2) Apple is not interested in splitting the stock, nor was it the last 27 times this has come up.

      3) Apple doesn’t need to do PR with investors. Maybe you missed the last 5 years of non-transparency.

      What Apple does, and will continue to do, is make best-in-class products people want to use. People who use Macs and iPads are Apple’s customers; they couldn’t possibly care less what fund managers think. Are you an investor – institutional or otherwise – who sees value in that? Great! Welcome aboard. No? That’s fine too.

      1. you are not contradicting what I’m saying.

        exactly: apple is not interested in dividends, stock split or giving a lot of PR (I mentioned something like that at the start of my post). and that are the reasons why I said I think aapl stock is not growing as it should.

        for a company worth over 300 billion it takes a lot to move the stock price up: where is the $$$ from the new investors coming from if they don’t give dividends, don’t reassure fund managers etc?

        you said “they couldn’t possibly care less what fund managers think.” You think that is wonderful but how exactly is that helping people who own aapl stock now?
        (my post was talking about apple investors not consumers)

        Apple makes the best products and it can keep selling a ton but aapl stock wont go up until people want to invest in it (and I think investors won’t until Apple does some of things i suggest). Apple can keep making money and people can keep refusing to buy the stock: the PE will just get more compressed.

        I’m just a small investor but I’ve made over $150,000 in profit the last few years in the recession from aapl but the last six months the stock has just sat there. some other holdings I have have outperformed aapl in that time (although I think aapl by valuation should have done better).

        1. Why should Apple pay dividends? To reduce its profits? To make investors happy?

          Investors will be happy so long as Apple continues to perform well and the stock price increases. Apple doesn’t play Wall Street’s games, and could care less about how its stock does as long as Apple as a company does well.

          Apple is different than other companies (Microsoft, etc.) – Apple does not feel the need to pander to its shareholders. Apple believes that if it does well in designing and selling its products, then its shareholders will reap the benefits. It does NOT believe that it should benefit shareholders and then try to make good products with the money it has left over.

          If you’re not making money off of Apple stock, that’s your problem. You already made $150,000. Congratulations. Apple doesn’t care either way, because your financial gain/loss has nothing to do with how well Apple products are designed and sold.

          1. @bizlaw:

            you say “Apple doesn’t care either way, because your financial gain/loss has nothing to do with how well Apple products”.

            this is legally wrong.

            apple has a fudiaciary responsibility to its shareholders. The Main financial Reaponsibility a public listed company has (via its board and management) is to its legal owners: the shareholders.

            if you don’t understand that should not be posting on my thread.

            I’m a happy aapl investor but I’m just saying that Apple can do more to help investors now (as it is responsible to do) for example reassuring fund managers.

            (as for “Why should Apple pay dividends? ”
            why don’t you read my original post? Apple should pay dividends so that it can attract investors who want dividends, it will be bought by dividend yield mutual funds. Huge number of investors will only buy dividend yield funds. To move aapl up there has be investors willing to buy. How many times do I need to explain this?)

            1. you guys would do a far better job of helping yourselves and helping society and humanity in general (including US farmers) by focusing your energies on figuring out why the heck the banks got bailed out and where the money went, instead of analyzing to death a moot question of whether AAPL is undervalued or not or should pay dividends

            2. @Janet

              it’s people like you who are not helping solve the economic problems in the U.S: i.e people who have NO CLUE how the economy and business is run. It’s like a person who can’t swim giving advice on how to be a lifeguard.

              If you don’t understand dividends, PEs, profit margins, public company responsibilities etc. how do you understand the banks? The banks and politicians just took advantage of business cluessless people.

              If people were MORE BUSINESS AWARE the who shebang mortgage bank fiasco wouldn’t have happened.

              Helping and supporting companies like Apple that thrive even in the recession is good for the economy and PROVIDES JOBS.

              so it’s better that people don’t invest in companies like apple that provides jobs and pay taxes? We should all sit around, not invest and build the economy but just moan about the poor farmers? Farmers aid relief comes from the billions in taxes thriving companies like Apple provide. Apple pulls in tens of billions into the U.S as well from overseas sales.
              And Shareholders are the ones that have invested their money in making Apple.

              apple investors are helping the US survive, what exactly are YOU doing?

              no wonder the US is in such sh*t: business clueless people like you Janet.

    2. “One common belief is that android is killing Apple and apple will end up like Mac vs Pc in the 90s, few know that Apple makes at least 50 times more money off mobile than Google. Worries of Jobs succession plan, android etc is freezing aapl. Apple should continuously explain and reassure investors and these issues.”

      That is the big issue. Market manipulators are spreading these fears and making money from the results. Apple could start counter propaganda or it could just let time tell the story.

      Once iPad duplicates the dominance that iPod achieved, people won’t fall for the FUD after two consecutive triumphs.

    3. Dividend payout are for mature stocks with slow steady growth. If Apple has proven anything over the past 14 quarters is that it is still a growth stock. July of 2009 I believe Apple was trading at 134 and it peaked at over 360 some time in October of last year. The economy has been pulling itself out of a recession for the past 8 months. Apple is holding ground between 325 and 355 while Google fir tad same period is bottom out on a double peak. Apple is 50 points off their 52 week high and Google is 142 points off their 52 week high. If Apple wasted their cash giving dividends they would not be able to finance and accelerate advances in the component market which allows them to afford cheaper component deals and preserve and evev increase their margins. Three quarters ago they announced that their margins would take a hit due to lower ASP of what they were selling. Not only has margins been preserved but they have increased. Can you say the same for those companies that gave dividends over the same period?

    4. Nice post. Agree entirely. Unlikely to see dividends issued as Apple wants with its cash, to weather any storm and retain ability to pick up attractive technology quickly. With manipulated stocks from great companies, best strategy might be to go long, and wait till the stock catches up. But Apple defies rules as it continues to grow at huge rates year after year. Need a crystal ball here.

  4. Apple is being punished for not paying a dividend. Much of Wall Street buys based upon the growth of the company and that steady dividend. You never really get to benefit from Apple’s amazing growth and profit margins until you sell the stock.

  5. The thing that I find most amusing is that one of the reasons the Street is able to punish Apple is exactly the reason its products are so successful: its secrecy. If Apple blabbed about their innovations years prior (like some Redmond companies), competition would be much faster to market. To the analysts secrecy is akin to uncertainty, which is obviously a market bugaboo.

  6. The markets uses the excuse that aapl is a large cap stock and treats it as such. However it is performing like a small cap.
    This is win win for them. They can manipulate it alll they want without fear of losing.

  7. i know people will not like to hear this, but hard truth is the market is anticipating Jobs’ loss. his health is clearly not getting any better and most expect is just a matter of time … even next year.

    i’m sure Jobs has already laid out a 5 year road map for Apple, and the team can obviously execute better than any on their own. but the market does not anticipate that far ahead.

    1. Tell me this, oh venerable AlfieJr, if AAPL’s decline lies in tghe anticipation of Steve Jobs’ demise . . . what is your explanation for the recent drop in the DOW, the NASDAQ, RIMM, NOK, MSFT, DELL, HPQ, and more equities too numerous to mention? Is everyone holding their collective breath over Michael Dell’s passing as well? Do no other market forces come into play here, oh Cumaean Sibyl? Pardon me if I find your analysis as simplistic and puerile as that of almost every other analyst spewing forth today. (Does anyone have a grain of salt handy?)

      1. Ummm duh, if Jobs succumbs to his failing health then where will Dell and Microsoft get their new products from??

        Their stock is just as dependent on Steve’s health as Apple’s 😉

  8. well, thanks for the insults, R. you’re a classy guy.

    of course the whole market is flat/down now due to the overall national/global reasons. duh. but the point of the article is that Apple, uniquely and alone, is dramatically outperforming every other company and the economy – right now, this year. so one would normally expect its stock price to reflect this surge.

  9. The SEC is a worthless piece of shit. Totally powerless to do anything about stock manipulation, not just Apple, but many others, Apple just seems to be taking the biggest hit for what??? Can’t wait to see it shoot up and watch all the shorters jumping out windows and splatting on the pavement.

  10. Apple stock is definitely being manipulated by Wallstreet. Since Apple does not follow the wisdom of Wallstreet, it does not give benefit to Wallstreet’s penchant of fat fees and high debt. Apple does not need to borrow; therefore it does not have to pay exorbitant fees and interest to the banks. Apple is not interested to take on big debt for expansion; therefore the investment banks were deprived of their fat fees for consultancy and services.

    Now Wallstreet is trying to depress the stock price of Apple. By doing so, it hopes to accumulate Apple shares on the cheap and then carry out an hostile raid on Apple.

    Apple’s management must make sure that they do not lose control of the number of stocks in their possession in order to prevent such nefarious activity of Wall Street.

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