Apple is still a growth company

Mark Hibben for Seeking Alpha:

Following Apple’s (AAPL) fiscal Q4 earnings report, the stock has risen by about 6.6%, prompting many in the tech business media to ask whether the rise is justified. Some have even offered bearish assessments that Apple has ceased to be a growth company. My view is the diametrical opposite. Not only is Apple still a growth company, but it remains significantly undervalued.

MacDailyNews Take: Amen, brother! Hallelujah!

A favorite pastime of Apple bears has been to cite such setbacks as proof of permanent decline. This has been going on almost since the founding of the company. One wonders why the bears still regard such arguments as persuasive.

Another misconception I frequently encounter among the bears is that “Apple is just a consumer goods company.” …I’ll be blunt. Consumer goods are things like toothpaste and dish washing liquid. To call Apple a consumer goods company is to completely ignore the fact that Apple is one of the most successful fabless semiconductor companies on the planet.

Apple is best situated to continue to innovate in products and services compared to peers such as Google and Microsoft. Apple has mastered a level of hardware/software integration that its competitors can only aspire to. I’m confident that Apple will continue to innovate new products and services that will drive continued growth for many years.

MacDailyNews Take: Spot on, accordingly we’ll drink to that!

Interns: TTK, please!

Cheers, everyone!
Clinking Beer Mugs

8 Comments

  1. I could have sworn Apple is considered a zero-growth company according to many articles on the internet. Those articles mainly focus on declining iPhone sales and nothing else because Apple is still being called “The iPhone Company.” Anyway, I think Wall Street considers even single-digit growth as zero-growth when it comes to Apple.

  2. I’m not sure what a growth company means to one analyst or another, but here is a look at AAPL’s closing share price on the first trading day of the year for the past five years:

    Date Close Y/Y %
    1/2/19 $157.92 -8.32%
    1/2/18 $172.26 48.31%
    1/3/17 $116.15 10.25%
    1/4/16 $105.35 -3.64%
    1/2/15 $109.33 38.36%

    5-Yr Average 18.81%
    5-Yr Median 10.25%

    You’ll notice a couple of minor dips, last year’s being the scariest (but a great time to buy in while the stock was “on sale”), but even with those dips, that’s an average return of nearly 19%. A consistent 18% return will double your money in less than 5 years (or double your debt if that’s your credit card rate). A 10% return will double your money in the 7-8 year range. Today’s closing price (compare with 1/2/19 above) is $260.14, up over $100 a share or 64.73%. If that’s not a growth company, can someone please enlighten me as to what is?

  3. FWIW I went all in on APPL in 2006. Since then the stock has grown 3000%. That’s an average growth of 30% per year (compounded). by comparison the NASDAQ has grown 270% over the same time frame.
    Most mutual funds max out at 10% annual growth if you are lucky.

    1. 2006 to about 2012 were heady days as Apple went from strength to strength.

      Unfortunately since Cook arrived, stock has been buoyed as much by stock buybacks as anything else. Momentum can only take Apple so far. At some point it will have to deliver superior quality at affordable prices again.

      iphone sales peaked thanks largely to obscene pricing. Mac users are still waiting for a proper desktop workstation and a repairable portable that has a decent keyboard. Apple is nowhere to be found in Education, Cloud services, or Servers. Apple went all in on Ahrendts and Ive fashion and its golden watch failed. The allure of Hermes leather watch bands may excite MdeeN but everyone knows Apple products are now almost all disposable.

      Now Apple claims its timepiece is a healthcare accessory. Not without FDA approval it isn’t! Instead of making iTunes work better, Apple chased after zero-profit Spotify. Instead of dominating the home, Apple abandoned networking. It copied Amazon and Google talking speakers and it fumbled its way into video streaming instead of buying Netflix when it was cheap. Both the talking trashcan and the teevee set top box showcase the most useless digital assistant ever. Maps and other subsidized freebieware remains second rate. Sorry, but Apple looks like an unfocused rich kid who can buy whatever he wants but doesn’t have the dedication to make anything truly great, far better than the competitors. That is why Cook has to go.

      But Jobs’ app store keeps printing money, so all is great. Yay! Let’s all pretend that the disjointed mess of unrepairable products that Apple currently produces (or rather imports from China) are all perfect and priced appropriately…. the MdeeN delusion continues.

      Right now AAPL is riding high because there is no other place for an investor to park their money and earn a decent return. Apple’s video production business hasn’t been exposed as a money hole yet. Tariff threats have all been delayed so many times nobody believes that the orange boy who cried wolf can be trusted — otherwise AAPL would crash. So for now of course investors will load up on gadget maker and retailer stocks before xmas. Watch them dump the stock after xmas. They always do.

  4. The author does not know the markets well. The P/E ratio of Apple is 21.88. The PE ratio of Microsoft and Google are 28 and 27.5. The PE ratio of Coke (aka Coca Cola) is 28.8. The PE ratio of Proctor and Gamble, which owns the big toothpaste and detergents and shaving cream brands, is 75. If Apple were valued like Coke or P&G its stock price would be between $350 $900.

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