Explaining the recent Apple selloff, and why the stock looks undervalued

“Apple’s stock has seen a sharp sell-off in recent weeks, falling by close to 25% from all-time highs seen in October,” Trefis Team and Great Speculations write for Forbes. “The declines have largely been driven by reports that the company is cutting back production orders for the iPhone XS, XS Max, and XR, casting doubt on the uptake of the company’s newest devices. While the concerns are legitimate, considering that the iPhone accounts for about two-thirds of Apple’s revenues, we believe that Apple’s stock remains undervalued at current levels.”

“We expect Apple to see modest iPhone revenue growth in the long run, driven by the ASP increases,” Trefis Team and Great Speculations write. “Apple’s margins could also see some upside in the medium term due to multiple reasons. For one, Apple has been driving significant growth in its high-margin services business… Separately, the company could also see some tailwinds in the near term due to declining semiconductor prices.”

“Overall, Apple looks undervalued at the moment following the stock declines. The company currently trades at a forward P/E of just 13x (under 12x adjusted for net cash) based on our FY’19 EPS projection of $13.70 and the current market price of $177 per share as of Tuesday’s close,” Trefis Team and Great Speculations write. “Apple’s aggressive share repurchases are also another factor that will power EPS growth, with the company spending more than $70 billion in FY’18 on buybacks.”

Read more in the full article here.

MacDailyNews Take: AAPL was undervalued before its recent overdone haircut.

Apple is no longer worth anywhere near one trillion dollars – November 23, 2018
Apple to lower iPhone XR pricing in Japan in order to boost sales – November 23, 2018
Why the bad news on Apple keeps on coming – November 23, 2018
In the darkest hour of Apple’s ‘white-knuckle period,’ some investors are loving it – November 21, 2018


  1. This is just temporary and AAPL will be fine in the long run since the fundamentals are still strong with Apple. But, I would hate to see Microsoft becoming the most valuable company yet again, even for one minute, they are unfortunately very close now…

    1. Microsoft has easily overtaken Apple in market cap without breaking a sweat. This shows how poorly Wall Street thinks of Apple. Apple isn’t even worth more than Microsoft which has a P/E of 43 and an EPS of 2.45. Apple is apparently doing everything wrong as far as Wall Street is concerned.

      I’m not too concerned about it but it sure is disappointing how Apple’s market cap value evaporated within a couple of weeks while Microsoft held its value like a rock. Wall Street totally values cloud businesses over hardware-based businesses. Microsoft shareholders are now dancing in the streets and laughing at Apple shareholders. Big investors dumped Apple like they were scraping dung off the sole of their shoe. Negative Apple rumors can take away $240B of value in the blink of an eye. Apple stock is the stock market’s equivalent of a big wet noodle. Pathetic.

      I’m happy Apple is buying back stock quickly and I’m getting my dividends. It’s just a pity big investors don’t have any confidence in the company.

    2. The stock is not tanking because of anything to to with Tim Cook, Apple’s innovation, no new Mac Pros or any of the things the anti Mac idiots around here can’t stop whining about. The market is tanking thanks to Trump’s threatened destruction of the current world trading system. Trump is unilaterally damaging friend and foe, using the size of the American economy to bully and hopefully shake down the world (because America is so disadvantaged). And Apple is damaged more than any other company because they build in, and sell huge quantities to, China. Trump is declaring war on China not with guns but with trade, and Apple is caught in the crossfire.

  2. If the price keeps dropping and apple keeps buying back and retiring shares

    soon if you’re the last shareholder remaining you will own a company that earns $40-100 billion every three months!

    At 13 P.E it will theoretically if the share price stays static for Apple to buy back everything in 13 years or so (without even dipping into savings cash) even if there was zero growth.

    1. I am afraid that there is a major flaw in your logic, Davewrite. Even if Apple did not pay any dividends and used all of the retained profits for stock buybacks, the company could never buy back nearly all of its stock.

      As AAPL shares are repurchased, the remaining shares represent a larger relative percentage of ownership. It would become increasingly difficult for Apple to buy back shares, assuming that those outstanding shares were even for sale. Unless the value of Apple tanks down into the penny stock range, this is not going to happen.

      Even if it were possible for Apple to repurchase all but one share using internally generated assets, the company would still have an inherent residual value, even if if did not retain any cash. At that point, Apple would belong to one entity – the remaining shareholder, and all profits from the company would belong to that person.

      The corollary to this discussion is that is is not possible for a corporation to “buy itself out and go private.” I just want to ensure that this issue remains squashed.

  3. The market has yet again, b!tchslapped Apple and their shareholders. Down another 2.5%.

    There has been relentless wholesale liquidation of Apple positions across the entire market. Enough to wipe out $60 per share…..PER SHARE.

    I’ve asked the drooling fan boys what price they would flip their position and begin to question Apple leadership.

    NONE have ever responded.



    What price is it fan boys?

    I LAUGH at those who find comfort in dividends. It would take me SEVENTEEN YEARS to earn what I lost from AAPL’s decline the past few weeks. SEVENTEEN YEARS!!

    The institutions that make the values of companies has spoken with utmost clarity. Apple is not worth what it used to be.

    It’s in decline.

    There is no innovation.

    Pipeline’s innovation is soldering ram to computers.

    Pipeline’s innovation is raising prices, gouging customers.

    The market isnt stupid. It can see right through the hapless Pipeline. They see a company bankrupt of ideas.

    I LAUGH at those who think and have said that $60/share in value will be back in the next month or two.

    Fat chance.

    Not going to happen.

    Well, maybe one thing would do it.

    Dumping Pipeline.

    A lot of shareholder value would return if the board fired Pipeline.

    When has an OPS guy ever run a company well, an innovative company?


    Pipeline: Steve Jobs’ worst failure. Ever.

    1. “I’ve asked the drooling fan boys what price they would flip their position and begin to question Apple leadership.
      NONE have ever responded.
      What price is it fan boys?”

      Seriously? Surely you know fanboys and apologists will not answer that question.

      The more important question is at what price will the board demote Cook to previous position (preferable), or get him out of there and pave the way for the second coming of Scott Forstall to faithfully carry on the Apple legacy…

      1. Unfortunately, Scott Forstall has found satisfaction with theatrical production, which is a siren call few can resist. The creative opportunities in managing stage plays are difficult to resist — you have absolute power over your troupe and production crew, you can influence the look and feel of the plays, and even change the script to emphasise the play’s moral message or its emotional impact. In a word, you can be Shakespeare.

        I have a strange feeling that someday, somehow, Scott Forstall will promote a play based on the Steve Jobs story. We won’t like it, but we will recognise the truth in it, that the men we worshipped made all sorts of moral compromises. And so did we, in following them.

        1. Sounds wonderful.

          Posted a couple days ago.

          Most convincing, KenT. I suspected much the same when it went down forcing out a valuable legacy employee for a specious reason (Apple Maps). Scott Forstall has the tech chops and years of experience under Steve that Pipeline can only dream about. Threatened is the only logical reason. Wikipedia: “it had been reported that Forstall was trying to gather power to challenge Cook.”

          A recent MDN article quoted a former employee as he described the highly politicized atmosphere inside Apple under Cook. Constructive criticism valued by Steve is now out the window and treated unfavorably. That supports your comment as a “ruthless” leader on the inside and mild mannered face on the outside.

          Reported Scott butted heads with Jony over issues such as FLAT iOS7 when Ive was promoted to SVP of design. Before that for years Steve and Scott were working together as the Apple visual gurus. So yes, Jobs always held him in the highest regard. More on Jony from Wikipedia: “Forstall had such a poor relationship with Ive and Mansfield that he could not be in a meeting with them unless Cook mediated; reportedly, Forstall and Ive did not cooperate at any level.” Scott knew the handwriting was on the wall as the power shift commenced. Also: “Forstall’s skeuomorphic design style, strongly advocated by former CEO Steve Jobs, was reported to have also been controversial and divided the Apple design team.” Translation: abstractionist Ive did not like it and won.

          Early career resume from Wikipedia: “Forstall joined Steve Jobs’s NeXT in 1992 and stayed when it was purchased by Apple in 1997. Forstall was then placed in charge of designing user interfaces for a reinvigorated Macintosh line. In 2000, Forstall became a leading designer of the Mac’s new Aqua user interface, known for its water-themed visual cues such as translucent icons and reflections, making him a rising star in the company.”

          Other career highlights:
          * Supervised the creation of the Safari web browser
          * Led the iPod team
          * Won fierce competition to create iOS
          * Responsible for creating a software developer’s kit for programmers to build iPhone apps
          * 2006 on responsible for Mac OS X releases
          * Took the stage launching the iPhone 4S to demonstrate first of a kind Siri

          Wikipedia: “Forstall was very close to and referred to as a mini-Steve Jobs, so Jobs’ death left Forstall without a protector. Forstall was also referred to as the CEO-in-waiting by Fortune magazine and the book Inside Apple (written by Adam Lashinsky), a profile that made him unpopular at Apple.” Not a surprise. Power struggles are common in every workplace. Today, you don’t need a legitimate reason to force someone out to protect your own arse and your political buddies. Talent and experience has nothing to do with it if your manager is threatened.

          No one on planet Earth is more qualified for Apple CEO. May the second prodigal son return and lead Apple higher…

    2. This is ridiculous, Von Tink and GoeB! First, by responding to your provocative post, one would be self-labeling as a “fanboy.” That is not going to happen, since that is a derogatory term with the implication that the person is a blind follower, a lemming. That would be self-defeating, since it would undermine a person’s credibility, thus fostering your argument. With stupid tactics like that, you should be a politician.

      Secondly, as an investor, I take my own counsel with respect to my reasons for being invested in AAPL and my criteria for buying or selling. I don’t owe either of you any explanation, rationale, or target values. In fact, I owe you nothing at all except derision and disdain.

      If (as it sounds) you are panicking as a result of the recent drop in AAPL, then you should not be investing in AAPL or equities, in general.

      Get a clue and stop trying to foment unrest in this forum.

      1. “In fact, I owe you nothing at all except derision and disdain.”

        Spoken like a true self righteous elitist fanboy and blind Apple lemming. Melvin, don’t you know you are NUMBER ONE here in that regard?!?

        Denial is not a river in Egypt…

    3. The only problem with your rant is that this has happened to Apple stock on a pretty regular cycle, the collapse of Apple never happens, and a lot of people regret not buying AAPL at a significant discount.

  4. So you’ve lost money on Apple shares that you hold.

    If you were really smart and knew all along how “Pipeline” was screwing the company, you would have sold at $230 and bought back in now at $173, or not at all.

    If Apple dumped Tim Cook right now, the share price would drop by half. Hopefully no-one takes your advice….

    1. “If Apple dumped Tim Cook right now, the share price would drop by half.”

      Just because you say so, ridiculous. Opinion is not fact. The world has lost faith in Cook and his mismanagement of Apple has finally come to a head…

  5. There is very good evidence that once again the stupid analysts have completely misread Apple’s supply chain. For example, the profit warning issued by Lumentum, the maker of VCSELs for the iPhone X true depth camera, has been portrayed as poor sales of products using face ID.
    However, Lumentum is not even on Apple’s list of suppliers for 2018!!! It seems that Apple has dropped Lumentum and moved totally to Finisar.

    I know Daniel Eran Dilger is an Apple fanboy, but if you read his article, there are legitimate reasons why four Apple suppliers have issued recent revenue/profit warnings, that may have nothing to do with iPhone orders/sales.


  6. Bought my first Mac in 1985 . Bought a lot od Apple shares in1995
    Have a goid look at thd P:E ratio of Apple and ogher co’s fir instance MS at 3 times Apple – really ?
    You gotta be kidding – Apple is s bargain at yhese prices

  7. Apple is a one trick pony and the pony is getting old. The smartphone is a mature market and the high end of that market- where Apple sells- is pretty much conquered. The rest of the smartphone market is all Android and profit margins are very thin.

    Apple is falling in to the pattern many other companies have followed by milking existing customers instead of growing the product line. Tim Cook wants to scratch your pocket for music, tv, books, cloud storage, etc instead of designing and building computing tools and software. The problem is that, to date, profits from all that stuff will not cover the considerable overhead of the Apple of late 2018.

    The Apple that developed the iPhone, the iMac, the iPad, iTunes and the iPod was a smallish, lean, highly focused company driven by the vision of one extraordinary person- Steve Jobs. Since then Apple has increased the headcount many times over and added a significant amount of physical space by purchase or lease and that has significantly increased the baseline operating costs of the business. Despite all these extra people, they seem unable to keep the Mac line up to date on a regular basis and have pretty much abandoned the educational, creative, scientific and pro markets.

    Then add that Apple under Tim Cook has larded the company with debt. That money has mostly been wasted with stock buybacks which is a very inefficient way to return money to shareholders. Instead of using cash like a weapon to grow the company and aid strategic partners like Jobs, Cook has borrowed truckloads of money and wasted it on the legal stock manipulation that buybacks are.

    When I look at Apple today I see a large, inefficient, visionless utility-like company churning out dividends on borrowed money while opportunities are missed and the product line grows stale. Iteration and imitation instead of innovation, just like Ballmer’s tenure at Microsoft.

    1. some people can’t help themselves, they’re always trying to peer through the veil that cloaks the future to see things that are yet to be seen and maybe, pull a bit of magic back this way. those people are mad. absolutely, mad. long live madness.

    2. Most excellent post, DG. You pointed out the stark differences between Cook and Jobs operation of Apple. Cook went his own way and not for the better IMHO. A few highlights:

      Led Apple into debt
      Money wasted on stock buybacks
      Issued dividends financed by debt
      Serious neglect of Macs
      Serious neglect of software that just works
      Serious neglect of timely hardware updates
      Exposed the company reputation to partisan politics
      Missed launch dates
      Supply at launch inadequate
      Many others

      The sooner Apple replaces a beancounter with a tech guru to lead Apple higher, the better…

  8. The stock buybacks are to put options “in the money” and then money into the pockets of management.

    A very poor use of earnings. Much better to design a new Mac Pro that customers want to buy.

    Lets face it. Pipeline sucks in many ways.

  9. It’s fun to speculate and second guess what Apple will do. The problem is we have very little hard evidence to guide us. Even when Steve Jobs was running things Apple went as long as six years between major product releases. Apple’s R&D spending has gone up a lot. Is that because of the iPhone? Maintaining current products? Is there some big new update coming to the health features of the Watch? Maybe some new category of product will come out in three year? As outsiders we don’t know. It’s like driving while looking in the rearview mirror. Only Apple insiders know what is coming.

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