7 reasons Apple is more doomed than you think
Henry Blodget says the stock is a 'buy,' but he's wrong.
By any fundamental valuation method, Apple is cheap. If you look at P/E, PEG, EPS growth, balance sheet, debt, product line, or just about anything else, Apple is cheaper than any of its peers. Just compare Apple's numbers with those of Microsoft, Dell, HP, Oracle, IBM, Google, Facebook. The market obviously does not agree.
"By any fundamental valuation method, Apple is cheap. If you look at ..."
When we are in uncharted territory financially, bringing up charts is just plain stupid. All the data can be massaged to read any way psychopaths want it to. The trick is to actually look out the window and say to yourself... hmmmm, we're literally one foot into the 21st Century Great Depression. I surmise that a handheld device mainly used for social networking and counter-productivity isn't going to have legs. I should probably avoid investing in it until we have an economy.
I have never been one to be in "Love" with Apple. I have an iPad, but not an iPhone (mobile just isn't too important to me as it comes with ridiculous fees to AT&T and such), having said all of that, Apple is one announcement from being back in the $700 range, and 1 Non-announcement from being $300. What I mean by that is all Apple has to do is release a new great product from their ultra-secretive R&D department (such as a new TV, TV attachment, or other game changing device) and the stock will soar again. Do I think that they will have such a product? I have no idea, but I doubt that the creative genius was all wrapped up in one guy sitting at the very top (sorry Steve). I anticipate that to get these great creative ideas into a tangible device takes a lot of people and many of those people are still at Apple. Having said all of that, it they don't announce something great, they will fall the way Sony has in the post Walkman era. Premium prices in a commoditized smart phone environment will be Apple's doom. Let’s all hope that Apple continues to provide things that people want and are willing to pay a premium for. No one likes to spend money on commodities, but we don’t mind spending cash on diversified products that change our daily lives like most of Apple’s recent products have.
Is apple trading below historical norms for a company of it's type and performance, yep. That hardly means it can't go lower. We are in uncharted territory for everything financial. We can't rely strictly on historical norms to determine the future.
It's hard to argue against Apple as a Cash generating machine. Think of how much cash they will generate from their balance sheet once interest rates normalize. One can argue that Apple will continue to have the Cult following it had when Jobs was alive. I still say it was more Myth than reality concerning his technological contributions in his latter years. Just how long will folks pay premium just to say I have a Apple product? So far so good. Next week reports will give some indication to if that might continue.
1. Style -- for the folks who think this is important
2. Reliability -- many fewer problems than PC's
3. Afraid of technology
4. Supposed ease of use.
5. Better operability in the case of iPad and iPhone.
Let's start with No. 4: While this was once a possible reason, the increased technological smarts of younger people (many of whom got a start on Apple PC's) and the latter incarnations of the PC made this no longer true. In fact, the Apple PC's got harder to use as the software Apps increased. If one learned on a Windows PC, it's not hard to move to later versions (with the possible exception of Windows 8). Moving to an Apple PC after being used to Windows is not easy for most switchers, nor vice-versa (I have friends who have made the switch both ways--it takes some getting used to).
No. 5: Others have caught up, especially Samsung and Kindle.
No. 3: Not as much of a problem as 10 years ago now that younger people are familiar with tech gadgets (see above).
No. 2: Only a slight edge still exists. I have not had any major problems in several years with WinXP/SP3 nor with Win7--I skipped Vista and Win8 doesn't seem worthwhile, just Window-dressing.
No. 1: The cachet may be slipping!?!
Net Net: Margins will likely continue to slip, although I agree that cash flow may keep up for awhile. Nokia is a good analog. No major tech innovations seem to be close, Apple or Microsoft or other--possible exception: Google Glass.
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