Apple stock still looks sweet

“Apple reported a 15% drop in quarterly revenue on Tuesday and a 27% tumble in earnings. The company’s shares responded with a more-than-5% gain for the week,” Jack Hough writes for Barron’s. “That’s a sign that investors have grown too gloomy in their view of the company, and that its shares have gotten too cheap.”

“Here’s another: There are 238 U.S. companies valued by stock investors at more than $20 billion. Apple ranks dead last among them, based on stock-market value (adjusted for debt and cash) divided by projected free cash flow,” Hough writes. “At 7.8 times free cash, Apple is 17% cheaper than second-to-last HP, which sells computers and printers. Not to knock HP, which is turning a managed decrease in revenue into hefty dividends, but recent financial results notwithstanding, Apple deserves a higher price because it’s not clear that the company is in decline.”

“Apple had 19% growth in services revenue during its latest quarter. That swelling stream can help smooth swings in the hardware upgrade cycle. The shares pay a 2.2% dividend, which looks likely to grow,” Hough writes. “Last spring, we predicted that the stock would rise from $108 to $150 in a year (“Why Apple Is Worth $150 a Share,” April 9). It now goes for $104. We still like it.”

Read more in the full article here.

MacDailyNews Take: Apple is the Rodney Dangerfield of tech companies.


  1. And it doesn’t seem to matter if like the Phoenix Apple flames up an even higher level with newer products, services and the like as then they predict “Oh well, then THAT’S it then, Apple’s done NOW, eh heh. Aren’t we disingenuous or just plain clueless?”

  2. This reflects a lack of confidence in Tim Cook to guide Apple into the future. He lacks the vision necessary to repeat past successes. Lightning that struck Steve Jobs will not strike Tim Cook.

    That, and Tim Cook’s ability to alienate over half of his customer base with his political stances.

    Sorry folks.

    1. So, Gary, you would prefer that Apple alienate the rest of the customer base with *your* political stance? I suspected as much.

      Personally, I believe that what Cook does on his own time and with his own money is his business. I am just glad that Apple, as a corporate entity, does not engage in politics. I wish other corporations would similarly avoid political activities using shareholder money.

      By the way, your statement is in error. There are significantly more people sympathetic to Cook’s stance on LGBT and other social issues than yours.

  3. To be honest, I thought that Apple would have been heavily punished for the drop in sales last quarter. Services, SE and the modest growth in iPad revenue seems to have been enough to get support for the stock.
    Like many others I do feel that Apple need to upgrade their products more frequently especially the Macs. I get that Apple may be waiting on upgraded chipsets from Intel that will allow them to evolve the machines. But upgrading the processors in the meantime will boost sales and maintain the momentum that Macs are the best machines around.
    I love my first gen rMBP. It is still going strong and looks like new. This is truly the best Mac I have ever had. But it is 4 years old and seems to perform as well as the recent rMBP that we bought for my wife. It is not right that a Mac that is 4 years old is so good in comparison to new machines.

    1. Forgive the Luddite in me, but . . .

      I have a 17″ MBP (full screen) from late 2011 that is currently running El Capitan and performing like a champ. I will “ride” this lovely device into the ground, if need be, for there is currently no Mac portable worthy of its replacement IMHO. Wish there were (but only of the full 17″ variety).

  4. Before earnings I thought iPhones sales for the June quarter were going to much lower than 2015, so I extrapolated this idea and assumed iPhone sales would continue on a downward slope into 2017. But, sell-through during the June quarter was actually around 44.4M units. This means sales were only 6 percent or so lower than 2015. This is good considering how huge 2015 was.

    Since 2015 was so lumpy I compared the 2016 revenue to the 2014 revenue. If Apple meets their high-end target for the October 2016 quarter then total sales for fiscal 2016 will be over 18 percent higher than in fiscal 2014. So, on average, they are growing about 10 percent a year.

    Tim mentioned during the call they continue to add Android switchers and new to smartphones. I don’t see why this trend would suddenly stop since over half the world’s population doesn’t have smartphones and Android continues to be inconsistent.

    Given the fact that sales didn’t fall off a cliff, a larger base will upgrade in fiscal 2017 compared to 2016, and because new users are continuously being added I would be shocked if they didn’t increase revenue by 5-10 percent next year. And since 2018 is rumored to be mega-cycle they could increase revenue another 20 percent that year.

    If the stock remains stuck in the mud does this mean it will be 60 percent cheaper than the worst performer in the S&P in 2018? AAPL is like the reverse of “The Big Short”. Maybe someone should produce a movie called “The Big Longjohns” – because shorters are going to need several pairs of these once this coiled spring has sprung.

  5. Alphabet will soon pass Apple in market cap for good. Tim Cook simply doesn’t have what it takes to keep Apple on top. It’s rather sad because Google practically gives everything away for free and yet the stock is certainly valued much higher than Apple stock. Alphabet’s P/E will eventually get back to the high 30s while Apple’s P/E will likely compress again. Apple should never have let Android take over the smartphone business because it’s ruined their iPhone business. Apple should have gone after Google’s search/ad business as payback and now it’s too late to do anything.

    Apple can’t sell enough iPhones to keep the company’s value high enough and they don’t have any other business to boost revenue to make Apple more attractive to investors. Maybe there will be a surprise in the product pipeline eventually but I wouldn’t count on it. Wall Street hates Tim Cook and there’s nothing that’s going to change their opinion of the man.

    1. mns48, I can tell from your comment that you really do not understand how business really works. I guess you would be happy if Apple told you how it was inventing anti-gravity and hyper space drive and lost money hand over fist. Cause, you know, it would sound so much better.

      Try reading the comments that explain why Apple is making money hand over fist. PS, stock value has nothing to do with company value these days. you are thinking of the 1950’s..

    2. Such incredible brilliance! The guy makes the same “point” about 6,242 times.

      It is simple for you: Short Apple with about 99.9% of your incredible wealth. You have it all figured out.

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