Bloomberg scribe thinks Apple’s valuation is ‘hard to justify’

Apple became the first publicly traded company valued at $3 trillion on Monday, touching the historic milestone briefly after a weeks-long rally in its stock price, but Bloomberg Opinion‘s Tae Kim thinks the milestone is “a breathtaking figure that’s hard to justify.”

Apple Park in Cupertino, California
Apple Park in Cupertino, California

Tae Kim for Bloomberg Opinion:

The climb has been striking. Since mid-November, as major stock indexes have stayed roughly flat, Apple shares have risen more than 20%, bringing the company’s value to a once hard-to-fathom $3 trillion, the first time a publicly traded company has reached that lofty milestone. To put it in perspective, that’s more than the gross domestic product of most countries.

MacDailyNews Take: Yes, it is. And Apple runs as a very profitable enterprise, unlike most countries, many of which run deeply in the red. Apple can’t just print up fake money. (Notice we didn’t say free money. Nothing is free.) Apple makes real money.

Apple is especially vulnerable to one of the biggest macroeconomic worries for 2022: inflation. Unlike software and internet firms, the company’s main business involves selling physical hardware products. That means if wages, shipping and raw material expenses continue to climb, Apple’s profitability will be crimped.

MacDailyNews Take: Because Apple, and Apple alone, can’t raise prices while everybody else can try to keep pace with uncontrolled inflation due to unsound monetary policies and wasteful overspending, is an illogical, laughable argument.

Beyond the external economic factors, it’s doubtful Apple’s prospects have improved dramatically to justify the latest rally. Remember that in late October, the technology giant missed analysts’ sales expectations for the three months ended in September, and Chief Executive Officer Tim Cook cautioned chip shortages would get worse in the holiday quarter.

MacDailyNews Take: Apple will post an all-time record quarterly revenue record later this month. Last holiday quarter, Apple posted the current all-time record revenue of $111.4 billion, generating all-time record operating cash flow of $38.8 billion. In three months.

The latest reports indicate this year doesn’t look much better. Late November at an investor conference, the head of AT&T Inc.’s wireless business said he expects customer growth won’t be as strong in 2022. That doesn’t bode well for Apple.

MacDailyNews Take: “Won’t be as strong.” So, in other words, it’ll be strong growth for AT&T, one of Apple’s hundreds of carriers worldwide, just not as strong as during the height of the COVID hysteria.

FYI, here’s Tae Kim from over a year ago (Bloomberg Opinion, December 30, 2020):

Apple’s latest lineup of iPhones needs to materially exceed sales expectations to justify a price-to-earnings ratio valuation roughly double its past history.

MacDailyNews Take: Apple’s stock price when Kim, like a broken record, last year lamented Apple’s valuation stood at $125.88. Apple is currently trading at $182.06. If you invested in AAPL right after reading Kim’s attempt to talk down the stock a year ago, you’d be up $56.18 per share.

When Tae Kim talks, smart people listen – and then do the opposite.

Apple isn’t cheap. The stock is trading at around 30 times 2022 fiscal year’s earnings estimates, which is more than 50% above its five-year historical average…

MacDailyNews Take: Five years ago, Apple was regarded (wrongly) by Wall St. as “the iPhone company,” a hardware maker. Today, Apple’s Services business alone is worth significantly more than Tesla which, by the way, is trading at 391.83 times 2022 fiscal year’s earnings estimates (not a typo). Now, there’s a valuation that’s “hard to justify.”

Tae Kim grasps at straws, yet finds himself empty-handed, unable to cobble together any foundation for his baseless conceit.

Apple is significantly undervalued. Apple is cheap.

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  1. Hey Tae Kim…..are you familiar with Michael Blair or Collin Gillis???
    Asking 4 a friend…

    Looks like you are taking the helm as a great contrarian indicator. Thanks!

  2. Agreed that Apple is now more properly valued (from a P/E perspective) than in the past. Also agree that Tesla’s evaluation is ridiculously high.

    Just wondering if/when Tesla’s short-sellers are going to make any money….

  3. If Apple is overvalued at 32x trailing earnings with double digit annual growth in its top and bottom lines, then what does that say about Microsoft at 37x earnings and Amazon at 65x earnings?

  4. Bond investments are not only risky, with inflation costs, they actually result in a losing investment. FB, GOOG, MS, AAPL are actually holding up the S&P and have become a bond replacement of sorts…capitol preservation/gain.

    1. If you’re saying bonds are risky because of default? That is not true. Some are risky, while some bonds approach the safety of treasuries. For example Apple issues bonds. Apple defaulting is extremely low (and why their bonds get snapped up).
      If you are saying bonds are risky as in you’re locked into today’s rate(profit yield to be specific) but rates next month or next year will be higher (buying the latest bonds will provide a better yield), that is not considered risky, that is just underperforming relative to the new rates.

  5. Harsh but true reality is Bloomberg is gossip trash. They like to cash in on clicks when Apple is rising and very much in the news. About a month ago Bloomberg put out the big iPhone production drop and hinting sales were sagging. Apple stock price crashed a couple of percent then right back up a couple days later. This is not even close to the first time Bloomberg has done this.
    It is too bad Bloomberg is never called to the mat. I’d like to see the SEC investigate to see if anyone close to Bloomberg or close to the individual “reporter” happened to short apple right before the story or bought Apple 24 hours after the story broke. Either way, these stories hurt retail traders while making life easy on the Algos and Institutions. Bloomberg hopefully gets its just desserts for that some day.

    1. I dont think individual reporters are that dumb. I think funds call reporters with “tips” they know the rags will use for clickbait, and that the funds use to manipulate the market. In fact Cramer reported this obvious technique that the sec continues to ignore this long term market manipulation.

  6. Mdn, that was such a brutal yet delicious and yet fully deserved take down. I hope it was as fun to write as it was to read. Kudos. I’m glad you keep pointing out his name and the loser from Goldman. They should become well known dispensaries of flagrant market manipulation misinformation (consistently ignored by the useless sec).

    Thank you for keeping a spotlight on their s***yness

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