I'll throw in my 2 cents... I have a degree in computer science and have a lot of specialized knowledge in technology. Apple is making insane margins by basically ripping off it's customers with anti-consumer practices. As an example... the iPods used to work with cheap ebay cables for video out. Then Apple decided to come along and add an encryption chip to require you to buy a $50 cable from apple to get video output. This redesign caused a lot of car stereo ipod functionality to fail because they didn't have this chip which is a huge problem. The iPhone is basically a totalitarian regime. You can only use apps that apple approves of you using. If the application isn't good for apple or their partners, it doesn't get approved. The whole AT&T monopoly was horriffic for consumers... it basically put a bunch of datahogs all on the same network and resulted in terrible cell phone service for apple customers. Took them years to let people choose their own network because AT&T paid them a lot of money. Apple products won't let you use memory cards so they can overcharge their customers for the 64gb version versus 16gb version. And don't get me started about their digital rights management. Their products are based on planned obsolescence... they don't ad features to products initially to force them to upgrade later. i.e. their iPad doesn't even have basic functionality like usb ports. The android platform is superior and free, offering a lot more choice to consumers and it will ultimately win out. There are a lot of manufacturers supporting it, and the growth is much higher than Apple. Apple has basically saturated the market and can only decline from here... they can only screw their customers based on ignorance over for so long. Competition is going to really force their margins down over the long run and eat away at their market share. That said Apple is highly profitable and I wouldn't want to step in front of a train and try short it... there are tons of worthless stocks with big losses that I can short.
Feb 11 2012 Nine_Ender, I never suggested shorting AAPL which is clear for all to see. As mentioned before - you repeatedly conflate TA analysis with actual trades. You do it intentionally but the question is why ? You're an obsessive stalker and pathological liar as other ET members have also discovered. Apart from being an embittered troll what is your motive for behaving this way ? I should disclose that a friend who's a consultant psychologist is fascinated by your pathological trolling and cyber-stalking. She blogs about this stuff and no longer waits for updates from myself, but now reads your posts directly so I can have you on ignore when I want. So now she gives me updates on your conduct. The psych wants to know if you've heard of mythomania - borderline personality disorder - histrionic personality disorder - if you've received psychotherapy as an adult - and if you're divorced how many marriages have you had ? Can you help her out please ? WARNING: Nine_Ender / bc1 / bhardy307 are stalkers and sockpuppets. http://www.elitetrader.com/vb/showthread.php?s=&postid=3420767#post3420767 http://www.elitetrader.com/vb/showthread.php?s=&threadid=227449
All of this you mention is true, but their iron fist also makes it possible for their products to be bulletproof for users who aren't tech-savvy. And their monopoly-like hold over their hardware, user interface and application ecosystem are reasons to buy the stock, not sell it. Mobile devices aren't meant to live forever anymore. 1000 battery cycles or one spilled drink and it's time to start over.
So the best company in the world trading at 10 times earnings (ex-cash) is irrational exuberance? No, it is utterly irrational pessimism and undervaluation, as has been the case since late 2008 where cash per share made up over 50% of its market cap. I always have to laugh when people 'analyse' a stock without even looking at the valuation. Given Apple's balance sheet, growth prospects, and earnings power, an ex-cash PE of 20 during a time of near zero interest rates would be perfectly justifiable - needless to say, that would put the stock much, much higher than its price today.
Also noted Enterprise Valuation at $465 billion, when a 3x to 4x multiple of that is typically where a stock ought to trade, and that's well over $1 trillion.
To BrettDoyle - it's true Apple earns very high margins. Remind me again why this means its a bad stock? If the margins were collapsing due to consumer backlash, you might have a point - but in fact nothing of the sort is happening, their products are flying off the shelves, as they have done each year since...well, since the original iPod. The company literally could not keep up with demand! So your point is simply meaningless arm-waving, absolutely disgraceful illogic from someone trained as a computer scientist, if you used such unsupported irrational suppositions in your job you would be fired as a moron. In the markets you will merely miss out on enormous low-risk profits that more rational traders such as myself have earned over the last few years. Per overcharging - again, the fact that Apple has the appeal and market power to be able to 'over'-charge (there is no such thing as overcharging in a free market - a business can only charge the price that people will willingly pay) is a bull point not a bear point. It means consumers think their products are cheap at the price, hence why Apple is swamped with insane demand even at the allegedly 'rip-off' prices they charge. To call Apple - a company that simply offers its products at a clear price, which you are free to accept or turn-down with no coercion whatsoever - to a 'totalitarian regime' at which your very liberties are stolen at the point of a gun, on pain of arrest, torture or death, is ludicrous and immoral hyperbole. You defame and insult anyone who has lived under a totalitarian regime, as well as anyone working at Apple, by comparing them to tyrants and mass murderers. Move to North Korea and then come back and tell us how much Apple 'oppresses' you, lol. Bear in mind that Apple is one of only two alternatives to what was the old Microsoft monopoly over not just desktops but laptops and mobile devices too - and thank god we now have some choice instead of that insecure frequently-crashing Windows-based bloatware. Apple is not a monopoly like AT&T was - there are numerous competitor OS's such as Android, Symbian, Blackberry, and countless companies competing against it. No one is forced to use OS X or Apple's iPhone or iPad, walk into any computer/phone shop and there are literally dozens of competing products, most of which are cheaper. Again you lie about the basic facts - you even admit yourself that one of its competitors is 'superior' and free, so you contradicted your absurd monopoly claim. Apple has faced and continues to face competition, so if your claim was correct, their margins should already have been eroded. You completely ignore factors that have kept margins high, such as superior design and usability, the halo effect across the Apple range (people try and iPod and like it, then start buying through iTunes, trying and buying an iMac, Macbook, iPad or sometimes all 3), the fact that it is far easier to sync and manage everything across the same manufacturer for your desktop at home, your laptop(s), your tablet, your smartphone, and your mp3 player, and your backup devices, rather than having different makes and OS's to worry about, which makes it a real hassle in terms of user-friendliness and compatibility. You ignore the huge locked-in cash cow that is iTunes/App Store, which has similar network effects to other successful businesses like Amazon. You ignore the intangible brand equity. You ignore the vast untapped market of China, and the enormous aspirational demand that will emerge across the BRICs and beyond. Another sign of a shoddy stock analysis is that you ignore the balance sheet and the valuation - even if EVERYTHING you said was correct, the stock is trading at a single-digit PE ex-cash. It's already more than priced in any 'worries' about falling margins. Unless it is going insolvent, no stock is a buy or a sell/short because of its fundamentals - it is a buy/sell/short based on its fundamentals *relative to the valuation*. A stock with 2nd rate fundamentals but an incredibly cheap stock price would be a great investment; a stock with the best fundamentals but a stratospheric valuation would be a terrible investment and quite possibly a good short. You completely ignore this factor so your entire analysis is moot. Finally, considering this is a trading website, you totally ignore the market action. Hello, can you say "raging bull market"? This is a stock that held up far better than the market during the 2010 decline and the 2011 autumn swoon, which climbed whilst the market stayed in a flat range, and which has skyrocketed during bullish periods in the S&P 500. Its relative performance is excellent compared to the market - lower and shorter-lasting drawdowns, bigger and longer-lasting rallies compared to the averages. It is making new all-time highs time after time. Sentiment, as evidenced by many posts on this thread and in the media, is amazingly *still* sceptical. How many times have I heard, during the inexorable climb from 80 to 500, that the stock is done, the business is past its best, it's a short or at least an 'avoid' - with no rational reasons given for these claims. In short, AAPL as a stock has pretty much every bull point going for it: very bullish market action with strong rallies, weak pullbacks, higher highs and higher lows, relative outperformance compared to the market; sceptical sentiment; high growth repeatedly beating expectations (except the 1 quarter where people held back for the iPhone 4s); great products, great management, great brand; bulletproof balance sheet; massive consumer demand. The last time I saw such an array of bull factors for a stock was the glory days of Microsoft and Dell Computer in the 1990s - except that they were at much higher valuations than Apple is today. If you take a look at all those factors and conclude anything other than that Apple is a buy at today's prices, then I'm sorry but you should probably stay away from growth stock investing because it is clearly not a business for which you are well suited.
<a href="http://stockmarket618.wordpress.com/2012/02/10/aapl-parabolic-irrational-exuberance">AAPL monthly chart warning as of Feb 5</a>
AAPL daily, weekly and monthly charts are extremely overextended and vertical moves like this are unsustainable. The inevitable reversal should be spectacular.
Posted the same anomalous chart by your gay rainbow avatar on twitter today. Give it a rest. Apple's done going down, since it probably made $10 billion last month in revenue. At 40% gross margin I would rather them pay their first dividend than announce a useless stock split and buyback or make any acquisitions. It really wouldn't be fair to the shareholder to not pay a divdend, and would reduce the volatility of the stock.