Why Apple stock is so damn cheap

“Imagine it’s late 2005. Apple’s fiscal year just ended and they reported their performance. You’re an analyst whose job includes forecasting the company’s performance for next year,” Horace Dediu writes for Asymco.

“Here is what you and your cohorts publish as a consensus: You go with a 13% growth for 2006, 15% for 2007 and 5% for 2008,” Dediu writes. “The chances are, you reason, that the iPod will not carry the company’s growth much longer. The competition is sprouting all over and Microsoft is rumored to be launching its own music player.”

Deidu goes throughout the numbers year by year, showing Apple continuing to disrupt various industries and blow away analyst estimates. In the comments section, he encapsulates his article in a nutshell: “the problem with Apple is that it’s a serial disruptor. Once it popped [with iPod], the market decided the story is over. If the company innovates and grows again [iPhone], there is a deep disbelief that it’s happening again. If it happens a third time [iPad], more disbelief. As far as I know the investment model for serial disruptors has not been studied. It’s so rare as to be a data set of one, maybe two.”

MacDailyNews Take: Meawhile, as Apple’s disruptions continue regularly, Mac unit sales set records with each passing quarter, outgrowing the PC industry as a whole for some 20+ quarters, and with massive headroom for growth.

Much more in the full article – very highly recommended – here.

MacDailyNews Take: Dediu’s disdain for “professional analysts” shines through not only in his article, but in his comments below it with such sarcastic gems as describing analysts as “wisest of the wise” and later describing analysts thusly: “They are highly competent. They have access to a lot more information about the market than we do. They are paid well for doing exactly what I showed is done in the post. In fact, it is precisely because of their wisdom that they are always wrong.”

The bottom line: Apple is just too good for its own (shareholders’) good.

[Attribution: Fortune. Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]


  1. Investors have never trusted Apple, thinking it’s a boutique phenomenon or that the company’s trajectory is defined by today’s products rather than its proven fountain of strategic inventiveness. Rather than bet on the transcendent parade of new products and leap-frog improvements of existing ones, Wall Street is distracted by the endless stream of lies and negativity from competitors who can’t compete and those who are having their lunch eaten by Apple Inc.

  2. I like this theory. But there are lots of additional factors.

    When a cow goes ‘moo’, what does it mean? These days the stock market is full of cattle who stampede hither and yon prodded by a wisp of a whim.

    It’s Emotional Herd Investing.
    Have fun figuring it out.


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