Apple, Amazon: A race to the bottom?

In this toughest earnings season since the crash of 2008, the worst man seems destined to win.

By Jim Cramer Oct 26, 2012 9:17AM

TheStreet.com LoGoDigital Vision., Digital Vision, Getty ImagesTwo great companies, two different standards. One totally rigorous and one not rigorous enough. I am talking about Apple (AAPL) and Amazon.com (AMZN) and the way Wall Street perceives them.

 

First, Apple reported a number that was extraordinary by any means, except by the means of Wall Street, where it was considered horribly disappointing, as if the company were made up of a bunch of brainless, arrogant bozos who couldn't shine Steve Jobs' shoes. IPads, iPods, iMacs, iPhones, iTV all below to well below what the Street was looking for.

 

Throughout the call there were several undercurrents. Let me tick them down.




  1. Apple has too many products, mostly at the wrong price points, that aren't selling well.
  2. Apple has either made too many devices and they aren't selling or it didn't order enough and wasn't ready for the onslaught, two mistakes that are considered equally poor.
  3. Apple's iPad sales are slowing dramatically, and there is a glut developing. The overpriced iPad Mini doesn't help the cause.
  4. Apple's current iPhone is a bust, and Samsung's competitor is much better.
  5. Apple's $120 billion in the bank is simply burning a hole in the company's pocket -- another sign that it doesn't know what it is doing.
  6. Tim Cook is an empty suit, and we have seen the end of the Steve Jobs products.

Suffice it to say that these analysts think Apple is pretty much finished and its 11x on next year doesn't matter because Apple is about to report its first down quarter in Q4, with sales light and expenses heavy. It's a lay-up short, because we now have enough detail to know that the company is washed up and on the way to Hewlett-Packard-like oblivion. Nice to know you, Apple.

Amazon, on the other hand, said nothing on its conference call. In fact, the company basically said its policy is to say nothing. It shouldn't even have had a call. There were no bright spots. It is selling like a drunken sailor, and who knows whether it is really adding customers.

 

The result? The stock, which sells at an indeterminate price-to-earnings multiple because who even knows whether Amazon cares about profitability, goes down for about 10 minutes to the low $200s and then spends the rest of the overnight session rallying. It is loved because, well, it is Amazon and it's doing really well. I mean, isn't it?

 

If we were to hold Apple to Amazon's standards, it would be at $1,200.

 

Now, I think you own Apple because its products are loved, if it can make them fast enough and it is storming the enterprise. I see its products triumphing in the enterprise, as users simply won't tolerate Hewlett-Packard (HPQ), Dell (DELL) and Research In Motion (RIMM) anymore. They want the Apple ecosystem. All of the canards about staying on Microsoft-Intel weren't answered by Windows 8, but more than 90% of the corporate world is stuck on it, and the IT people don't even feel threatened. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

 

Amazon, on the other hand, doesn't have to answer to anyone about how it is spending or even what it is doing.

 

To me, it's nuts. It should be totally the other way around, as we told subscribers Thursday night for Action Alerts PLUS. But it doesn't matter. The judgments are being rendered, and Apple falls short and Amazon is better than expected.

 

So it goes in this toughest earnings season since the crash of 2008-09, when the worst man wins.

 

JIM Cramer's FACE 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long APPL.

 

 

 

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19Comments
Oct 26, 2012 4:21PM
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Cramer, the Apple cider has turned.  The iPhone 5 is unavailable.  Those purchasing a new iPad version 4 (with a March, 2012 intro) in the past few months have an outdated product.  The mini adapters for lightning to 30pin are unavailable so use to car, docking stations, and power hampered.  A family with difference versions product need different versions of connectors now have a sorting problem...like having a remote for every source to the TV sitting on the coffee table.  Pay attention Cramer, it is a mess.  The Apple multiple you speak of must mean the added complexity to use their product set.  Oh, and the mini eating up production cycles for what?  More pins, adapters, and cables, oh my! 

Oct 26, 2012 4:07PM
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One can only wonder how well would apple do if their products were made in the USA, rather than ship all the production to China.  The public reaps no rewards for cheap labor, as Apple over prices all goods to the level of being produced by union labor in US.
Oct 26, 2012 3:59PM
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Everything that goes up eventually goes down. Apple is no exception. They have become the exact company that they opposed when they first started out. They are now controlling, arrogant and hard headed in both their approach and product base. Many are no longer falling for the fluff products they produce and are looking elsewhere.
Oct 26, 2012 3:12PM
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Why are the two even compared to each other? Amazon since inception has either lost money or made a razor thin profit.  On the whole has lost 10's of millions more than it has every made.
Apple just had it's highest quarter yet with 8 billion in profits and is the most valuable company in the world.
Oct 26, 2012 2:39PM
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All the negative AAPL junk written about the best stock in the universe is done because Wall Street pays so many writers/analysts to do just that to keep the market roiled so that big profits continue to flow from volatility-induced trades and pro investment "advice" that is often/always not in investor's best interests.

If all of us would suddenly think long term instead of short, that junk would correct immediately and Wall Street would have to think of some other tricks to get our money..

Oct 26, 2012 2:20PM
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Unless I am mistaken: We have seen the end of Steve Jobs's products because Steve Jobs is DEAD.

Now unless they have his brain in a bottle attached to wires or they have perfected human cloning/electronic conscious transferal: It's game over for ever seeing Steve Jobs like innovation again.

"Apple has too many products, mostly at the wrong price points, that aren't selling well"??? If you haven't figured out Apple products are overpriced, you must be new to Earth. Also: I'd really like to know where in the world IMacs/iPhone/iPod/iPad/and mini-deals are "too many". Sounds like diversity to me.

Oct 26, 2012 2:06PM
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How much has changed in Apple today from a month ago? Not enough to knock off 15% I guarantee you that. Wall Street is crazy. Check this out...

LNKD: Forward P/E of 252.37x, Yield of 0%
FB: Forward P/E of 55.40x, Yield of 0%
AMZN: Forward P/E of 105.58x, Yield of 0%
AAPL: Forward P/E of 11.24x, Yield of 1.74%

Maybe it is in income or sales growth? No, APPL is nearly as good as FB at 61% and 45% respectively. AMZN has negative income growth and sales growth is worse than AAPPL. LNKD is much better but seriously 200% of $0.12 isn't that great. When you are that small, it is a lot easier to grow. Is that growth sustainable? The number isn't as big but AAPL has amazing sustained growth year after year. I can't think of any mature company this size that has year over year growth like this.

You can hate Cramer all you want but any market that puts such a high premium on FB, LNKD, and AMZN but trashes AAPL is not in its' right mind. It just proves an old quote from Warren Buffet. (paraphrasing) A successful stock is like a successful marriage. The most important thing is not income or growth. It is low expectations.
Oct 26, 2012 1:18PM
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I'd like to see you post some facts that distinguish B2B sales from direct consumer purchases. We all know that corporate America is terror-driven and now shuffling deadstock between them. No one is really going OH WOW I NEED A NEW EXPENSIVE PHONE and only ignorant people take from the economy but shop Amazon to make sure their neighbor is unemployed. I don't see Apple or Amazon surviving this. I am also concerned about Google... great business plan that seems to be working well for them, but a shrinking audience for diversions from basic living and survival. When they invent technology that sees me as the superior choice to do the job and then puts itself out of business... let me know. 
Oct 26, 2012 1:15PM
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He knows crappola.  He is a shill and a con man. Where is "Gallagher" when you need him!  He will be "busting" pumpkins" ... soon.  Personally, I prefer 'watermellons"  ..white on the inside with a tinge of red on the outside.  Cante'lopes'..are good....this guy is as full of it as the that half and half in office.

Starbucks, anyone! 

Oct 26, 2012 12:57PM
Oct 26, 2012 12:01PM
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Apple going down ! Where Apple goes the market goes DOWN !  TAKE YOUR MONEY AND RUN !!
Oct 26, 2012 10:52AM
Oct 26, 2012 10:40AM
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Consumers buying more things is NOT up.The price we have to pay for things is up !Good spin on the facts,way to go.
Oct 26, 2012 10:30AM
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Cramer's logic .....If I say something and the market goes the other way then the market is wrong and I am right.

Psychologists - what is your term for that condition again?
Oct 26, 2012 10:26AM
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Nice call on Facebook wednesday cramer ---- what was it $24 when you raved about it's great quarter and how it had turned the corner.

You "experts" seem to be pushing the small investor to buy FB .....I wonder why? 
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