“How is it that one of the most-loved, fastest growing, dominant companies in all the land can only be trading at a market multiple? That’s equivalent to being a C student for those unfamiliar with the term,” Yahoo Finance’s Breakout writes. “The company in question here is none other than Apple (AAPL). The fact that it trades at a market multiple implies that it is no better than the average stock in the S&P 500 (an assumption that is just insane).”
Apple and the S&P 500 both trade at about 11 times estimated forward earnings for the next twelve months, which tells me – and many others – that contrary to the notion that Steve Jobs was propping Apple up, fears about his departure have long been holding it down,” Breakout writes. “hy else would shareholders and analysts have been able to largely shrug-off the worst news to hit Apple in years –maybe ever?”
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Breakout writes, “Because everybody knew this day might come, long before it actually did. And it’s why analysts like Scott Kessler of Standard & Poor’s – and virtually every other firm that covers Apple – came out today and backed their ‘buy’ ratings; because Apple is cheap.”
More in the full article, including a video discussion, here.
Related article:
Has Steve Jobs become too much of a liability for Apple shareholders? – December 17, 2008
The ominous cloud of SJ leaving the CEO position is now behind us. It has been hanging over this stock for several years. It’s very possible that once the news is assimilated AAPL will break out of the box it’s been in for a long time.
Losing SJ as CEO may not be all bad. Nobody, not even Steve Jobs, is perfect. I’m sure he has held some biases that prevented better decisions being made in some areas, like splitting the stock. I’m not sure that particular decision will change as long as Steve remains COB, but there are undoubtedly other areas where Steve has prevented better decisions being made.
We will see.
“Risks” that limit Apple’s price were not tied only to matter of CEO succession plan (while health worries flourished, Apple’s shares managed to multiply their price).
Analysts always said that very limited product/service range make Apple very dependable on each concrete release of each concrete product line.
For example, if Apple would release iPhone 5 which will turned out to be major technical failure (poorly features, bad quality, glitchy device), then in just quarter or two Apple’s revenues and, most importantly, profits will sink very badly.
This does not happen to more diversified companies. Even if certain model of certain product range would turn out a failure, then still the company as whole will not suffer significantly.
However, these concerns are consequence of Apple’s core philosophy and addressed by other part of it: the idea of perfectionism — the will to polish product until its ready.
So these analysts with such concerns are wrong since they see only half of the picture.
I think there is more concern about Apple’s ability to obtain enough supplies and parts for its devices rather than Apple producing a poor iPhone or iPad.
The tsunami in Japan, seemingly constant shortages of memory used in iPhones, iPads and iPods, limitations for screens for mobile devices, etc. all could make it difficult for Apple to increase production to meet demand.
That, and the market really just doesn’t understand Apple.
“…the market really just doesn’t understand Apple.”
Truer words were never spoken, and as an Apple investor since 2003, that fact has made me a truckload of money.
Is Apple going to be forced into having their own manufacturing plants to produce all the parts necessary to build the next great device?
Actually many (including myself) hoped for wonder that would allow Jobs be healthy and to work as CEO.
Securities consultants are more realists than that, and they all along anticipated the day when “the wonder will not happen” reality will be admitted.
Despite this being XXI Century, medicine is incapable of handling many serious conditions and Jobs had to say that he is not able to continue to work actively.
Lets hope that in the remaining of his time (the longer the better) he will be able to contribute to Apple’s product development process. And, if he would feel bearable, he might even appear on some of keynotes as “guest star” (though it is not very probable any more).
Yes, the notion is that the stock market dislikes uncertainty. As long as Steve’s health was a factor, the market disliked it. Now that Steve has stepped down, bad as it may seem, it removes that uncertainty.
And yet, the stock virtually stayed the same Price. Which leaves us to think that this whole notion is nonsense.
The market had Steve’s departure already factored in. If it didn’t then the stock should have shot up today instead of dropped.
$100 billion? Seeing as they’ve only paid him $1 per year since he came back, I’d say they got good value for money.
the usual self regarding anal lices
All those billions and it looks like he won’t have much more time to enjoy it. Really puts things into perspective. Reminds me of the Shakespeare line from Richard the Third “A horse! A horse! My kingdom for a horse!”
Anyway, I agree with those who say the market factored in his health long ago. If this were a surprise then we’d have seen a big drop, but we all knew this was coming and the stock price reflected that accordingly. That being said, I don’t necessarily view this as a buy. I really do think over time we’re going to see Apple fizzle a bit and maybe more so than the market is currently pricing into the stock. Much of what made Apple so great was the innovation factor. Innovating isn’t essential to be successful. Google’s Android is a good example of that. They aren’t innovating all that much, but they have a decent OS that’s on a lot of phones. The problem Apple has is it’s not in the business of building on other people’s successes. I’m just not sure they can continue to come up with groundbreaking products like they have been without a Jobs type person at the helm. I think it’s very possible they become the next Sony. They’ll probably be ok, but not the game changers they are today. If that’s the case, I just can’t see investing in them until some of this uncertainty is sorted out.
OK, so ‘the day after’ is over and APPL stock went down 0.65%. When exactly will the Day Trader HERD catch on to this ‘It’s OK to buy Apple stock now’ hypothesis?
At least the HERD didn’t stampede away from APPL in a PaNiC. 🙄
When APPL went down 0.65% on a day when the market as a whole dropped considerably more … AAPL outperformed the market.