Analyst: Apple’s stock price reflects ‘fantastically pessimistic assumptions’

“Last week, Morgan Stanley’s Katy Huberty noted that Apple’s (AAPL) current stock price suggests that the market is expecting the company’s earnings to grow minus 2% in perpetuity,” Philip Elmer-DeWitt reports for Fortune.

“In the first of a two-part series, Bernstein’s Toni Sacconaghi on Monday drilled a little deeper into that -2% growth rate and found a series of what he calls ‘fantastically pessimistic assumptions,'” P.E.D. reports. “In other words, the company is growing like gangbusters, not shrinking like its current P/E ratio would imply.”

Read more in the full article here.

22 Comments

  1. As long as there are enough Apple Haters, the stock will be depressed. This is just a fact of the market. Microsoft has dominated the software market and has legions of captives who have the Stockholm syndrome and I believe it will take a few more years before people believe there is an alternative to Windows. The iPhone has done a great job at convincing the market that Apple can make the grade for the average Windows sufferer.

    1. You are mistakenly transposing the psychology of fanboys onto that of investors. Investors and specifically large institutional investors as well as mutual fund managers don’t look at Apple like MS and Android fanboys do. It’s much more about the stats and the money.

      This mentality is far less pervasive in the investment community than it is among everyday users. There are far more complex reasons that AAPL is depressed rather than some silly fanboy bias.

      1. Like what? Cut the Fanboy crap, and yes if you look at stats and think its future is depressed then you need to get your head out of your ass. iPhone, iPad & Mac sales continue to climb, except for iPad, market share is still low so lots of room to go up. Plus iPhone 5, iPad 3 & Apple Tv in the near future, 30% growth projected, $80B in cash, no debt and we have not even talked software. Depresesed ha! Stock manipulation at its finest.

        1. I dont know if you’re replying to me or the original poster, but without any real analysis of the stock, or acknowledgement of the market at large and the challenges we are facing, your post is the one that reeks of fanboy crap.

  2. Exactly!

    It always amazes me that despite the chasm of difference between a standard LIVR vs a more thorough TOST analysis, how many so-called professionals choose to evaluate AAPL through the smallest of windows.

    Why?

    Fear.

    Despite everything they know, despite common sense, investors fear that AAPL is so big, it can’t get bigger, and price shares as if they’ve already tanked.

    To fear, might as well add uncertainty. There’s never been a company like AAPL, so investors are uncertain, and uncertainty drives prices lower.

    Charted on a BACN graph, AAPL needs to punch 5 times as hard to see the gains of a single punch from its competitors.

  3. Anal……. yet looking to drop the stock price.

    Actually I say go for it. Its too high now for me and I could use it to drop to say 350 so I can pick up a few more shares.

    Curse my luck for not buying more shares at 80…

    en

    1. Secular has to do with a trend happening over a long period of time. Tailwinds help objects speed up as opposed to headwinds which slow things down. I figured he meant that iPhone and iPad sales were trending up and will continue to do so possibly being pushed by a recovering economy.

  4. 1-to-10 split and AAPL will take off like a scalded dog. Many people think it’s too high, not because it may be near its all-time high, but because it’s about $400 per share. To many people, THAT is what’s too high.

    1. The market cap of AAPL will not change with a split. The P/E does not change with a split. Forward looking earnings will not change with a split. A stock split is not the cure for undervalued AAPL. In many respects the absolute price of a company’s stock is irrelevant, especially now in the age of electronic brokering where you aren’t required to buy stock in even lots of 50 or 100.

      A percentage growth is a percentage growth no matter how the stock is priced. This stock split argument has been beaten to death and it holds no merit.

      1. I know, and agree with everything you said except one thing. It does hold merit. Ask 100 people on the street if they would buy AAPL today, and to the ones who answer no, ask why not. Many of them will say it’s because it’s too pricey, i.e., too many dollars per share, even though you & I know it makes no economical sense. Get those people to buy a few shares at $39/share and we’ll see $50/share before summer.

        1. You nailed it Wingsy! I’ve held the same belief for quite some time now. A stock split will potentially diversify the INVESTOR pool, and lower the bar to ownership.

          The last time it split was way back in 2005 when it was trading at roughly 10% of it’s current price.

        2. From your fingertips to Tim Cook’s (and others’) ears, Wingsy! None of my friends want to buy one (1) share of AAPL @ $400, but they WILL buy ten (10) at $40. That’s a fact, macromancer, and it’s simply human nature. Yes, the math is undeniably the same, but the effect on the fiscal psyche is VERY different!

          1. If you’re friends don’t know that ultimately they are still buying the same amount of VALUE regardless of the actual physical number of shares, then I suggest they shouldn’t be playing in the stock market.

            It’s like you saying they wont take a 50$ bill from you for free because its just one piece of paper, but they’ll take 50 ones because thats 50 pieces of paper and they perceive that it’s worth more because the stack is bigger.

        3. So true. My older bro is one of the smartest people I know. He’s a Johns Hopkins trained heart surgeon. He even got an A in macro and micro-economics, but he resists buying stocks priced like Apple. He’s far more comfortable buying stocks that are priced in the twenties. His big problem is that he remembers not buying Apple when it was $12 back in 2003, even though $10 was cash! Now, he can’t pull the trigger knowing that he could have bought at $12. It reminds him of what could have been.

        4. Investors walking down the street aren’t the ones who affect the price of AAPL on a daily basis. In fact walk down the street and ask 20 people if a) they even know how much Apple stock is worth and b) what Apple’s ticket symbol is. Everyday people buying a few shares here and there aren’t the ones who control the price of the stock. It’s the large institutional investors not people buying a few shares here and there. And in the end buying one share is the same as buying 10 shares. You are going to make the same % of gain regardless of how many shares you buy. Not to mention the fact that a few thousand people a day buying AAPL isn’t going to change the price of the stock. Look how many shares are traded every day and you’ll see what I mean by this.

          The absolute value of a stock does not matter. It only matters in relation to it’s P/E and growth potential on a percentage basis.

          What im saying is you look at stock like bread and milk. It’s not the every day people that matter. Besides if they want to get into AAPL, there are many ways to do it without paying a lot of money.

    2. Presume you mean a 10 for 1 split.

      There is an actual justification based on the way the Dow Index is calculated. The dow would add Apple to their index except any dollar stock would skew their formula. Index funds, which track the stocks in the indices, are popular with investors and any company which is added to an index is automatically bought by the funds, so if Apple were added there would be an immediate boost and a bit more stability. Also being on the Dow would mitigate the lingering notion Apple is a boutique phenomenon.

  5. There’s absolutely NO GOOD REASON why Apple should split their stock. They don’t need the money. The reason why it’s not going up is because the only way to make money from it is to sell your shares. Long-term investment buyers don’t want to liquidate their portfolios to make money, they want to make dividends from them. If Apple would start paying dividends you’d see the stock price climb. As it is there’s no reason for it to go up because the large investment firms can’t make money without liquidating their holdings and that’s not their style.

  6. The Obama depression is going to last for years to come.

    Equities, bonds, commodities, real estate, precious metals, and AAPL are all heading down.

    Then, the Fed will print money and they’ll all go back up. But, the U.S. Dollar will be worth about a dime. If that.

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