Instinet: Caution, Apple stock near 7-year high in valuation

“Apple’s valuation is getting toward the upper end of its range since 2010, writes Jeffrey Kvaal, and even though he sees some ‘near-term’ reasons for optimism, such as health sales of iPhone X, it warrants caution,” Tiernan Ray reports for Barron’s.

“Apple’s stock is getting up there in valuation, writes Jeffrey Kvaal of Instinet this morning,” Ray reports, “while reiterating a Buy rating on the shares, and a $185 price target.”

Ray reports that Kavaal is “concerned that ‘Apple has traditionally traded poorly between supercycles’ of the iPhone.”

Read more in the full article here.

MacDailyNews Take: Lots of “concerns” trying to talk down AAPL this morning.


    1. It just means that it is the highest price during that time period. Basically in between the endpoints the stock was priced lower and just indicates they ‘returned’ to where they were near the earlier endpoint.

  1. It is funny that the analyst is concerned that Apple is trading at 14X multiple where almost all of the other companies in the same area are at 30X+ multiples.
    We have seen less of these types of articles in the past few years but still a good way to spread FUD and get the stock to drop.
    Apple is at a record high so eventually some serious profit taking will occur.

    1. You forgot to mention a company like AMZN, that’s been public for 20 years and has a P/E > 300. Analysts across the board plug AMZN, and don’t seem too concerned about its valuation.

      1. AMZN is FAR more diversified. Its profits aren’t hinged on any one single product. AAPL’s profits come MASSIVELY from the iPhone. Any way you slice it… that does two things.

        1. It means Apple doesn’t take ANY risks with the iPhone because profits are tied so closely with it.

        2. It makes investors ( justifiably ) nervous.

        Yes, Apple’s been diversifying into services, but still… the iPhone, a single product, carries the profitability of this company.

        Amazon stock risk is tied to the economy in general… so very low risk… which is why P/E multiples aren’t as much of a concern as AAPL.

        1. @ME Here

          I am fine with your premises, they just don’t support your conclusion. Why would a “low risk” company carry a 300 P/E ratio? Amazon’s businesses (with the exception of AWS) are pretty low margin, and the company’s customers are very price sensitive. Take a look at the P/E ratio of a low risk company such as WMT, for reference. Amazon is a great company, but stock valuations are about market growth and future earnings. Amazon has the former in spades, but I don’t see near enough of the latter to justify a 300 P/E.

        2. If Amazon’s risk is tied to the economy in general, then it’s systemic risk, and Amazon should get the market multiple, particularly since they’ll never be able to reap those profits that will make their current valuation sensible.

          Just think, Amazon is approaching Apple valuations, and yet, do you think Amazon will ever be able to approach Apple profitability, because that is what the market is saying will happen in the future, that Amazon will one day in the not too far off future be able to make $40+B in a year.

            1. I’m getting a yearly dividend payout from AAPL that’s roughly the same as my initial investment. Yes, I invested a long time ago and stuck through the thick and thin, but it’s an amazing position to be in. AMZN is years away from being able to provide that kind of investment income, if ever. I can sleep well at night with Apple’s amazing low P/E.

        3. Apple actually makes stuff, and it is all very nice, high-tech stuff, too. This is unlike Google, which basically just sells online ads. And Amazon, which is basically just a glorified online fulfillment house. So, ya, Apple makes stuff. But Google and Amazon don’t really.

          Apple is diversified. It makes hardware and software, too. And let’s not forget services. Again, top-notch stuff. And Apple’s sales are worldwide, with a nice diversification and balance by global sales by region. And they are in the consumer business and the corporate space as well.

          Apple continues to prove they are an innovation machine. Okay, okay, I admit that Google did “innovate” some really irritating online ads we all hate. And Amazon did “innovate” by owning the online product fulfillment area before any else woke up to the idea of it. But what are Google and Amazon gonna do when their main businesses face competition or otherwise become obsolete ? (And Amazon somehow got Denise Cote to side with Amazon against book publishers and Apple Books in the lamest anti-trust case I have ever seen. Too bad Judge Cote failed to make an insightful ruling that would bring the obsolete Standard Oil “smoking gun” anti-trust rules into the era of modern game theory, behavioral economics, and evidence-based legal rulings.). We all know nothing lasts forever, right? I don’t know what they will do. But in the meantime I know what Apple is gonna do: they will continue doing what they have been doing for decades. They will innovate and grow their business.

          If you look at it very seriously, I believe Google and Amazon are nowhere near as diversified as Apple.

          It is one reason I have been long Apple since 2003. Yes, all my eggs are in one basket. But I am watching the basket very carefully. I am out when I see a better “mix” of businesses that currently exist in Apple shares.

      2. Agreed, CraigNotGreg. Amazon is one of those “some day the profits will bloom” plays. But people seem to keep overlooking the crucial flaws in Amazon’s business model. First, the online retail industry is driven by shipping costs. Amazon Prime is an attempt to alleviate those concerns, but it costs Amazon a lot. Second, there is plenty of retail competition online for Amazon. It may be the biggest gorilla on the block (or was, before Alibaba), but the barrier to competition is low.

        1. Amazon is well aware of shipping as a major cost. For years Amazon has been increasing its interests in the actual logistics chain to the point of owning their own planes and partnering with shipping companies on purchasing ships. This allows them to better control their shipping costs during high volume periods and less reliant on delivery costs of UPS/DHL/USPS/FedEx/Etc.

          Actually Alibaba was well established in their markets before Amazon became interested in expanding to them. Barriers to entry are actually quite high for ‘new’ businesses similar to Amazon’s online retail business.

  2. One funny thing is that lots of analysts are currently casting doubt upon Apple’s prospects for this quarter, while Apple’s guidance for this quarter is very confidently predicting massive sales.

    The other funny thing is how many analysts gain financially from worrying their clients into selling when Apple’s prospects are looking excellent.

    Funny world, isn’t it?

  3. On another note. Amazon’s P/E has topped over 300 with no end in sight. Every single day, the higher the stock goes, Wall Street says it will go at least 30% higher. Amazon is absolutely crushing Apple in terms of share gains. How is it that Apple can’t even hold onto meager share price gains when it’s almost guaranteed consumers are buying iPhone X units like crazy?

    So, Apple is said to be at the top with no more gains to be had despite relatively high iPhone X demand. Meanwhile, the FANG stocks can run as high as they want to without any negative points of view. There is really something strange about Apple’s value. I’m sure the repatriation tax package will be passed and Apple will be sitting on a mountain of cash sometime next year, yet as far as Wall Street is concerned, Apple has nothing left to offer investors. It’s rather sickening in my opinion that the news media has to constantly cast a shadow over Apple.

    1. As mentioned by others, Apple is heavily dependent on a narrow range (possibly single) of product. This causes uncertainty in the stock resulting in a much higher volatility than its peers. Yes, services are becoming a larger segment, but that also ties back to iOS devices sales of which iPhone is king.

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