“I first noted a correlation between Apple’s share price and its balance sheet a year ago. In February, when I last checked, Apple’s share price was priced nearly at 4.6 times its cash value. The stock has had a brief rally but has returned to the trend line it’s had since late 2008,” Horace Deidu reports for Asymco.
“I should emphasize that this correlation between cash and price is abnormal. It should not be happening. Share prices for growing companies should be tracking its future potential, not its assets. I’m only presenting this data to highlight this abnormality. There is no fundamental basis for this happening. In fact, there is a basis for this not happening,” Deidu reports. “The relationship above is a symptom of another pattern called multiple compression.”
Deidu reports, “The last chart in particular shows how as a function of earnings and growth, Apple is priced near a low. Certainly lower than during the depths of the 2009 recession. Given this disconnect from the income statement, the pricing by balance sheet multiple seems to be a symptom of something deeper. Reasons vary with the seasons, but the company is not perceived to have sustainable growth.”
You have to see the charts in the full article here.
Phillip Elmer-Dewitt reports for Fortune, “Apple is a $530 billion company that grows like a start-up, but as Dediu demonstrated in a series of eye-opening charts Monday, the value of its shares have been compressed to the level of, say, a well-regulated utility.”
Read more in the full article here.
MacDailyNews Note:
AAPL’s P/E Ratio range over the past 5 years:
Minimum: 11.35 – Dec 2008
Maximum: 43.53 – Dec 2007
Average: 20.79
Current: 13.84For some context, Amazon.com’s (AMZN) current P/E Ratio is 186.07.
Denial
More than just denial. It’s evidence how much the stock is being used in the hedge and short market.
The big boys are using it to fleece billions from the unsuspecting public who are looking to grow their money for their retirement.
This isn’t exactly new news but it backs up my theory that there are crooks running Wall Street. That’s why Amazon can have a P/E of around 180 and Apple is given $0 growth. It can’t be explained and there is no valid reason for these types of discrepancies to exist. So when anyone says that Apple can only go but so low, there is no guarantee that is won’t go lower. It can go as low as whoever is controlling the market makes it go. Whoever these people are, they can turn a fundamentally poor stock into money-maker or a fundamentally sound stock into money-loser at a whim and nothing can be done about it.
Individual investors just have to go along with it. It seems very unfair to average investors. It’s something that seems so obviously crooked, but yet it exists and is allowed to continue. I have no doubt that Apple’s P/E will continue to be compressed no matter what the company does. The more revenue Apple makes, the faster the compression will take place. That’s one reason I think the calls of Apple at $1000 a share are impossible to achieve.
How exactly are these ‘crooks’ stopping you from buying AAPL at $1000 when they are selling their shares at $560? If you think the price should be higher, bid higher for the stock when you buy it. When these ‘crooks’ want to buy AAPL and you want to sell your stock, you want $1000 each but if there are no buyers, what can you do? Lower your ask price. This is the market.
Grow up and drop your conspiracy theories and learn how the market works.
I hope you are right.
At some point, these crooks will have to drive the stock back up in order to make money.
I agree with you that crooks are fleecing the uninformed, but those crooks have made me a LOT of money on AAPL stock. One just needs to learn their game and ride their train. AAPL is one stock that you either buy and hold or be willing to spend a lot of time researching and watching to be successful if you are bouncing in and out of it.
I call your attention to the fact that Apple is no longer just a growth stock. The dividend effect is going to have many small investors demanding Apple shares in their portfolios and without the dump so often used to drive the stock down. The demand for steady income in an ever increasing retirement community should help change this outrageous
denial of valuation. Apple is an investment, not a trade!
I’m no analyst, just someone who’s been long AAPL for about 7 years, but it seems to me that the market is convinced that Wintel will establish dominance where it is currently absent and that Apple’s successes have been more a function of Balmer’s seemingly unending hibernation than of any sustainable business model, and that Microsoft and Intel will re-establish their hegemony before Apple is able to attain unassailable leadership positions in any of the markets in which they compete. Sure, Apple has been gaining market share in the desktop market, and sure, their sales have grown while Wintel’s have stagnated and even fallen, but the dominance that Wintel has held over the market for so many years seems to the investing public to be merely on hiatus, a situation which simply cannot continue long enough for Apple to really establish the kind of mind-share that can truly allow the world to break from its miasma and really embrace Apple and its superior technology.
The finance industry is full of individuals looking to make a fast buck. Being able to play the game by betting against a stock that have everything going for it has created a situation where the outcome is fixed. There is little risk for those who are controlling the price. FUD causes the price to go down and Apple results causes the price to go up. Every now and then the stock is allowed to grow rapidly (note the absence of any FUD at that time) and the player cash in big time.
These conspiracy theories are, frankly, just a bit too far out. No, it is NOT some shady hedge funds that are so successfully manipulating AAPL, that the stock is so severely depressed. NOBODY, not any one single entity, nor group of entities, has that much financial power to move one half trillion of US dollars one way or the other.
AAPL and AMZN are two very different stocks. However, general perception around majority of those who have money in them tends to equate them (after all, so many of those investors listen to Cramer, who kept equating AAPL, AMZN, RIMM and GOOG in his “Four Horsemen of Tech” package). In other words, so many people have invested in these four equally, and in sync, so when they load up on AAPL, they also load up on AMZN. This took AMZN up to over $100B of market cap, when all of their numbers are absurdly low:
AMZN
Net profit margin 1.34%
Operating margin 1.79%
EBITD margin 4.18%
Return on average assets 2.92%
Return on average equity 8.63%
Employees 65,600
AAPL
Net profit margin 23.95%
Operating margin 31.22%
EBITD margin 32.87%
Return on average assets 27.06%
Return on average equity 41.67%
Employees 60,400
So, with fewer employees, and with complex manufacturing and distribution logistics, AAPL manages 15 – 30x greater margins and returns.
There are plenty of ignorant people investing in stocks. This wasn’t the case in the 80s or early 90s. It only became the case with the emergence of the internet and electronic trading, when every grandpa (and college kid) jumped onto the investing bandwagon.
Bring back the uptick rule.
Apple is certainly undervalued. But we need to wait till big investors sold their AAPL first.. the big investors have clearly signaled us they wanted to sell AAPL by saying Apple is over 700-1000 target price again and again. So we need to be patient till they say Apple is expensive …. overpriced….. declining ….
. This will mean time to buy .. trust me … it always works!!!!!
JIm Cramer (who used to run a hedge fun) explains how big funds manipulate the market : ‘fomenting’
specifically talks about Apple at around 3.35 minute.
Partial Transcript:
http://antisocialmedia.net/antisocial-multimedia/jim-cramer-on-market-manipulation-in-his-own-words/
(in some of his books he explains how to spread rumors – big investment guys hang out at the same bars apparently as ‘analysts’ and investment writers. The analysts and writers are mostly clueless and will write any bit of ‘news’ from the investment dudes whom they believe have ‘inside info like I guess like ‘foxconn supplied constraint, iphone delayed’ etc. Because of the deadline for scoops they never check anything. )
LOOK I’m not PRAISING cramer (treat his investment advice with big pinch of salt) but still his insights of underhanded activity is interesting — judge for yourself whether you think what he’s saying about manipulation is true or not (I don’t know enough to absolutely say whether it’s accurate or not) .
A blatantly undervalued stock is the right setting for a company buy back. The reason for the artificial price constraint doesn’t matter, only the magnitude and the duration.