Apple trades ‘like a steel mill on its way out of business’

“There’s nothing necessarily wrong with Amazon, Facebook, or Alphabet,” Philip Elmer-DeWitt writes for Fortune. “They are well-run companies with room to grow.”

“Apple is also a well-run company with room to grow. The difference is that Apple has stopped growing, at least for now. Meanwhile, it has a track record of hit products, owns the most valuable segment of every market it’s entered, and is making money faster than it can spend it,” P.E.D. writes. “That’s got to be worth something.”

“My headline is borrowed from venture capitalist Marc Andreessen, who tweeted the phrase before the latest round of earnings reports, accompanied by a chart labeled ‘Reality Distorted,'” P.E.D. writes. “I’ve adapted and updated his chart to reflect post-earnings PE ratios and added a second factor: Leveraged free cash flow.”

Check out P.E.D.’s chart in the full article here.

MacDailyNews Take: Will Mr. Market ever fairly value Apple?


    1. Funny – I said the exact same thing here a few months ago as well after relentless and constant daily selling pressure – didn’t matter if the markets were up or down, Apple was down, which happened to occur all of 2015 after reporting four pretty amazing quarters – I’m starting to wonder if Apple is deliberately shorting or encouraging this behaviour somewhere with someone capable of executing it to have the price driven lower – ultimately helps the buyback, but perhaps taking it private as well, bottom line is the P/E makes no sense whatsoever.

      1. It’s sickening to see Apple with a P/E of 10 and Microsoft with a P/E of 30. What exactly makes Microsoft that much better an investment than Apple where investors will happily pay a huge premium for MS but not Apple. Do investors really believe MS can make all users pay for Windows 10 after FORCING everyone to upgrade? That’s highway robbery if Microsoft can get away with doing something like that.

    2. After this barrage of lies, stupidity, inability to interpret data and defunct analcyst brain activity, if I were Apple I’d be immensely impressed with the idea of going PRIVATE.

      Being able to afford going private is another matter. If Apple pull their dividends, I might begin to believe they’re interested.

      1. … You’re just an uneducated, ingnorant, unemployable, male Apple cheerleader, Derek.

        I’m sure Tim Cook enjoys your scrawny, hairy little legs though; alongside the lipstick and that five-o’clock shadow.

        You’re a JOKE!


        1. Have you ever seen a psychologist to have your personal problems diagnosed? I have! What I learned is that my problem is other people’s problems, such as brain dead haters like yourself. Thus started my brave and joyous journey of troll trampling. May you also enjoy. Your masochistic desires have been fulfilled. 😛

    3. It is clear from the repeated comments here on MDN that most people here don’t seem to have a clue what it means to “take Apple private”.

      Taking it private means buying the stock (100%) from all of the existing shareholders. This is typically done by presenting an offer directly to shareholders which is then voted on. The % required to pass is typically spelled out in the company bylaws. I don’t know what they number is for Apple.

      This is completely different from a company buying back stock (share repurchase plan), which is used to reduce the number of shares outstanding and reward remaining shareholders with higher earnings per share. This method cannot be used to take a company private, because the remaining stock still represents 100% of the company equity, just spread over fewer shares.

      A company cannot take itself private. An investor group, private equity, or even company management can take it private if they can find financial backing, but not the company it.

      As it stands, unless something truly catastrophic happens to the Apple share price, I do not see how anyone would be able to come up with $500+ billion dollars to buy out all the stock, without even considering that shareholders typically demand 30-50% share price premiums to sell out, which would bring the price most likely over $700 billion.

      For the love of God, can we now please drop the “take Apple private” posts?

      1. The market cap minus cash and securities is around $300 billion. This time next year it will down to around $250 billion. If Apple stops growing then the market cap less cash will be $0 in six years. If AAPL continues to drop or if the stock stagnates for the next couple of years then I think a group like maybe China will make in offer.

        Does anybody actually believe consumers will stop purchasing Apple products in the next couple of years? Apparently, there are many that believe this, otherwise the stock would not be trading at $95.

    1. “Not only do they make money faster than they can spend it, they make more money than anyone else.”
      What are they waiting for, raise dividend to 4.5%. Investors and hedge funds will pile up AAPL

      1. No. Get rid of the dividend. It has done nothing but put Apple into debt. Wall Street has flipped off Apple since then so doing the same thing and expecting a different result is insane.

        1. If Apple gets rid of the dividend, then what do loyal Apple shareholders get? At least the dividend makes it worthwhile holding onto Apple stock. The blasted share price isn’t going anywhere. At least when I see the share price going down I can feel somewhat satisfied I’m getting something back. It’s kind of stupid to own stock in a company making billions of dollars every quarter and the shareholders are getting nothing from it. They’re not even giving me a deep discount if I want to buy an Apple product.

          Everything Apple has done over the last year or so, Wall Street sees it as a bad move and the price drops even further. Without the dividends, Apple would be no better than owning some stock like Hewlett-Packard or WalMart. Heck, even now WalMart has a higher P/E than Apple.

    1. Growth is no longer important, what the market looks for now is a growth in the rate of growth.

      Alternatively it also looks at large companies who make very little money but have huge market share, spend fortunes on money losing projects, yet somehow everyone thinks they will magically be able to magic large profits out of thin air almost at the flick of a switch.

    1. BTW: The term that keeps hitting my mind about the modern day financial and stock market systems is:


      The parasites have managed to ruin conventional sources of investment revenue. I mark the point where that ended as the point where the acts that created the 2007 ‘Great Recession’ began. Parasitic investors had given up, so they turned to what equates to crooked means of scouring out money from what’s left of these two systems. Screwing over the value of AAPL while elevating the value of vacuous AMZN, GOOG, FB, etc., is merely hypnotism preparing for the next session of scouring.

      IOW: I no long expect the ethics, character, creativity and quality of Apple outside of Apple and a few other companies. The masses within the economic game are either crazy or psychopathic in behavior. But that’s just me, today, at 1:14 pm ET, 2016-02-08. Time for lunch and further adventures in caffeine. No blow or cat’s pee please. I’m enjoy being sane. 😀

  1. Consider 3 types of investor: (1) fund manager: Apple is not a good choice for income funds because the dividend return is too low. Apple has been a very good choice for capital growth but, clearly, growth is slowing and attention is switching to more promising growth stocks. It does not help that Apple is so secretive – this just makes fund managers nervous. (2) private investor: While Apple’s share price kept going up the private investors were happy. They are now mostly unhappy and many will have sold their Apple stock. (3) Hedge Funds: Apple is a large stock so it requires a lot of capital to move the stock price, and Apple is secretive so there is always a risk that the would-be manipulator could be caught out by a surprise product announcement. It’s unlikely that any one hedge fund would be shorting Apple in large enough transactions to make a difference here.

    Apple derives 66% of its revenues outside the US. The biggest impact on revenue for the next quarter is the high US dollar. If the dollar stabilises at current levels, growth will return but perhaps at a more muted level because iPhone will be somewhat more expensive than rival phones which are not priced in US dollars. If the dollar continues to rise then Apple will continue to suffer revenue hits if they maintain current margin levels.

    Apple could do a few things: (a) they could stop buying back stock and increase the dividend. I note that Apple is using its offshore funds to open new facilities overseas (especially R&D facilities in Canada and Italy, and perhaps elsewhere). This might presage a change in the buyback policy, and might lead to an increase in the dividend. However the increase would have to be significant before Apple becomes an attractive proposition as an income stock. (b) Apple could reduce their margins and maintain relative pricing against the competition in order to maximise revenue growth. They may well decide to do this if they decide that the reduction in hardware margin is offset by an increase in services margins. There are signs that Apple is moving in this direction – specifically Apple’s focus on service revenues in their most recent earnings report. (c) Apple could release a new product category with significant growth prospects, and probably will, but this is a case of ever diminishing returns because each new product category has to generate ever more revenue as Apple grows in size.

    Cook is a smart guy. He understands, better than most, the numbers game. He is not the creative type, as Jobs was, but a numbers guy – and probably the best numbers guy in the business. The proof of that is in Apple’s success in building a supply chain to produce the millions of phones, with new models every year, with few or no delivery issues. Cook has begun the transition to a new model for Apple which will reduce Apple’s reliance on regular blockbuster product introductions and emphasise the huge services revenue created by the iPhone user base. In short, Apple will milk the user base for revenue and profit while still working on new blockbuster products. The iPhone range will be fleshed out, a-la iPod, with products at more price points and, as the services business grows, the focus will switch from hardware margins to market share and services income. Foreign cash will be pumped into new facilities to shift expenses from the US to foreign markets where the profit is generated.

    Apple has a very bright future. It just won’t be the same future.

    1. And what would it mean to say a stock ticker, or a stock itself, was ‘growing’. Does that mean the stock certificates are gathering matter and enlarging in physical size?

      Better perhaps: ‘The value of AAPL has stopped growing, at least this hour. It did grow last hour. But then it went down again. Oops, the value is growing again…’

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