patrick.net

And I hate Apple.

pkennedy says

pple has massive profit margins and always had on anything they sold.

How 'bout Performas from the ninety's? Those were certifiable junk - were they profitable though?

http://en.wikipedia.org/wiki/Macintosh_Performa

The iPad is a tremendously successful new product, the proof is how many have sold and the riots outside a Beijing Apple store.
I have an Android phone which I love. The Apple OS in the iPhone is better. Some Android apps stop working, sometimes the phone has done funny things, sometimes the phone has frozen like a windows computer. I love my Android, but the iPhone is a more solid and beautiful device.
The mac computers are of course popular for lots of reasons. One reason that most don't notice is it is running UNIX under the hood, and that is a big difference.
Whether or not Android is installed on more phones than iPhones is irrelevant, Apple will probably sell 3 billion of them before 2020, and they make $300 bucks on each one I think.
McDonald's where I live made a fancy McCafe with espresso drinks and smooties and etc. and they are selling tons of them. I dislike most of the food but their coffee drinks are fine as is their wifi. I think the place is making money but I don't really know.
Stocks go up and down but until the whole world has everything they want, people will consume. Governments will continue to build things (Caterpillar) and food always needs to be grown (Deere, Monsanto, DuPont). Energy will be consumed, (Exxon/Mobil) drugs still taken (Pfizer) Coke will be popular, etc.
Will the emerging markets growth slow down? They are buying up our stuff. The answer is maybe not soon. In China for example, the government needs growth to keep raising the standard of living of Chinese, and to keep them satisfied with the news of high GDP numbers. Is this all a house of cards? Maybe for them, but the politicians there like to keep the whole thing going forever even if they are building bullet trains to nowhere and empty cities.
For my money, stocks will be going up for quite some time, especially companies like Apple. I think the stock will reach $1000 per share in my lifetime.
Of course, I could be very wrong, so that's why I have 99% of my money managed by others.

@terriDeaner
They still sold them, and every one they sold, they made probably 10x the profits that dell made on the same power of a computer. They have always had a niche market, but now they've managed to make that market a lot larger and able to offer up multiple products. They've taken a commodity business and brought back massive profits to it.

Before 2002 they sold computers, which were replaced every 3-4 years in a cycle, with a small following of people.

Now they have phones that are replaced every 2 years often.
They have music players that break after 2-3 years and often have such large upgrades that even if they don't break, people want the newest one
They have apple tv - hasn't caught on yet, not sure if it ever will. Since it's a product you use in your house where people aren't as likely to see it, the brand has less impact.
They have the ipads which are massive money makers.

pkennedy says

They still sold them, and every one they sold, they made probably 10x the profits that dell made on the same power of a computer.

But how many (total) did they sell? 10 times a small number is still relatively small... And I don't remember the underpowered Performas being all that popular by the end of the run.

terriDeaner says

And I don’t remember the underpowered Performas being all that popular by the end of the run

In the early 1990s Apple had a helluva time trying to figure out product strategy. They couldn't keep the early Performas on the shelves in 1993 since Sculley's low-cost strategy resulted in Macs becoming more affordable (and the LCIII-based Performas were very good machines for the money, basically a IIci for $1500).

But in 1995 Spindler screwed up product allocation by building too many shitty Performas and not enough of the uber-cool PCI PowerPC macs. This left him with a billion dollars of unsellable Performas and months-long waiting lists for the high-margin (and quite awesome) PowerMac 8500 and 9500s entering 1996.

So...is the stock market topping?

thunderlips11 says

It’s pretty unergonomic.

Exactly. The iPad isn't for real work, it is, as you said, for consuming media.

I'm happy with a small laptop or netbook. Once the transformer-type netbooks become really good I will consider one of those, no doubt.

Troy says

But in 1995 Spindler screwed up product allocation by building too many shitty Performas and not enough of the uber-cool PCI PowerPC macs. This left him with a billion dollars of unsellable Performas and months-long waiting lists for the high-margin (and quite awesome) PowerMac 8500 and 9500s entering 1996.

Looks like Performas were not too profitable in the long run after all...

Apple's history is interesting but irrelevant to the question of what they're doing today. No one will deny that they completely lost their way in the 1990s.

It's hard to argue with their fundamentals over the last ten years though. You can diddle all you want about the reasons people buy Apple products, but it's undeniable that they're outgrowing the industry in units, revenue, and profit. Every quarter.

It can't go on forever, but there's no evidence to support the idea that the business is softening. Instinct is great -- trade away, take the contrarian position...but if you're claiming that there are numbers to back you up, please share.

The comparisons to Android make me laugh. iPhone+iPad+iPod Touch outsell them by a mile, but who cares anyway? Apple's numbers are doing nothing but growing...and if there was a zero-sum revenue pie to split, in some imaginary top line mobile OS share cockfight or something, who would be gaining ground at Apple's expense? Not Google.

Re: iPad "not for real work".. Sure. There are classes of applications that don't work well on a tablet. It isn't sold as a primary computer, at least not by Apple. For Apple, it's a "found revenue stream", and they owned the market from day 0. They still do, completely and thoroughly. That'll end too (presumably, though the music hasn't stopped for iPods and iPhones yet), but even if it does, that doesn't mean Apple won't still be growing their numbers in the segment. Who cares? Apple investors sure don't.

Re: sightings of iPads vs iPhones.. I see iPads all the time, but not on street corners or bars being used by random people to make phone calls. This comes as no surprise to me, but maybe the world is different where you live. Still, Apple releases their sales numbers, and 10-Qs don't lie.

ObligatoryOriginalThreadComment: The market is running for no good reason, in my opinion. I expect carnage. Apple is doing fine on excellent data, but they're very likely to get smacked down with the rest of em. Maybe worse, maybe less, it's unknowable. If you're risk averse, I'd avoid Apple just because they're polarizing and the market punishes them unfairly just as often as it rewards them partially.

@quesera
All good points, except "The comparisons to Android make me laugh. iPhone+iPad+iPod Touch outsell them by a mile," Android outsells them by many miles. It's spreading everywhere, but few are as useful as the iphone.

There really is no reason to believe apple is going to have soft sales any time soon either.

The market isn't that far out of line with earnings. While earnings might not be growing incredibly fast, the current earnings support the stocks fairly well.

pkennedy says

Android outsells them by many miles. It’s spreading everywhere, but few are as useful as the iphone.

That's actually not true.. The Android - iPhone comparisons show that Android has exceeded iPhone in activations, but it doesn't include iPad or iPod Touch, which should be included if we're measuring OS penetration.

Android *will* exceed iOS some day, and probably soon...but again, who gets the revenue when Android gets a "sale"? If the seven Android distributors all pooled revenue and increased their margins by an order of magnitude, maybe Apple would have some competition.

I know it isn't clear from my tone here, but I actually do wish Apple had a competitor instead of a half dozen scavengers fighting for the scraps. I don't seriously think Apple is swayed much by competitive pressure, but if nothing else, I think it'd be good for their share price if investors could make meaningful comparisons to other businesses.

I know iTunes does not require iOS, but I noticed recently that they're going to be able to stream personal music libraries bought at the iTunes store. Nice moat. I know it can be breached, but as long as Apple doesn't do anything to tick off their users, who wants to 'move' their digitized library? Apple end to end (and for the next year or two, A5 chips in everything.)

quesera says

You can diddle all you want about the reasons people buy Apple products, but it’s undeniable that they’re outgrowing the industry in units, revenue, and profit. Every quarter.

It can’t go on forever, [...]

Bingo.

But Apple makes about $300 on each iPhone, and they're selling tens of millions of them. Android makes money for Google in *potential* ad revenue if people use the phone's browser. I think Apple can go much higher but how much and how soon, I won't guess. I would be cautious of Apple at $500.
Maybe they'll start making TVs with Apple TV built in and compete with Netflix. Bang!
The market is almost always "going to go down soon". How much and for how long is the question.
If you have different kinds of assets, they tend to smooth out your overall picture. Time and patience are your friend in investing in stocks.
If I had to gamble, I would say the large successful mature businesses will be doing well.
I lived in Mexico for example and noticed multinationals like Nestle and CocaCola, Caterpillar, Merck,Pfizer, Bayer are ever-present. Don't forget entertainment, everyone seems to have cable or satellite.
In my travels all I have seen is people who want to consume and it seems to be increasing, not decreasing. So, I am optimistic long term for stocks and will continue to invest in them.

terriDeaner says

Bingo.

Nothing goes on forever. If you're arguing, by that logic, that AAPL is doomed, then you're just hand-waving.

thunderlips11 says

Margin Compression. The cost of components always rises, especially when your direct competitors are your supply sources (LG Electronics; Samsung).

Well, the cost of components generally DECREASES over time.

The competitors/suppliers argument is one of Reggie Middleton's themes too.

Five counterpoints:

1. In some cases, the component source is just a fab. Apple could go to Intel for the A5s, for example. They own the design, and Intel wants some mobile action badly.

2. In many cases, Apple is the volume buyer of the component. If Apple was forced to shop elsewhere, the supplier would suffer more than they'd gain.

3. In some cases, Apple was heavily involved in the component design process, and most certainly gets a) favored pricing, and b) a non-exclusive but guaranteed access to the products. e.g. displays.

4. In many cases, the manufacturer makes more margin on selling the component to Apple than they do on selling their own finished product which includes the component. also e.g. displays.

5. Apple just spent $11B to secure future component supplies. They're not messing around.

Of all the mistakes that Apple might make, being beholden to 3rd party frenemies is clearly one they have given some thought.

Keep in mind though that Apple can afford a whole lotta margin compression. They added $6B in cash last quarter on $25B revenue. They now have $65B in cash and $0 debt. No one else even comes close.

DanH says

So…is the stock market topping?

Good question - a lot of Apply lovers on here. I had to buy a Mac so I could walk business partners through configuring their Macs to work with our line of business applications. I've never had to spend a grand to help the windows users...but I digress...

This may be a neophytical (if that is a word) question but how will inflation or swings in the value of the dollar play out in the market? Do the indexes compensate for this or does a devalued dollar "inflate" the market?

Stocks are pretty good at beating off inflation. Companies sell products, inflation causes those products to go up in price and the companies earn more. Multiply by their standard PE and you've got a new stock price, which reflects the inflation.

I'm wondering if during heavy inflation, if companies with decent debt get themselves out of jail for free essentially? Assuming they've got bonds and don't need to reissue, it seems that if they wait out those bonds, at maturity, they'll easily be paid off. While cash rich companies might be hurt, because their cash reserves are dropping in value, pushing down their stock prices a bit.

Hyperinflation is bad for business and stock because the interest will go up.

No one will buy a stock with P/E of 20 if he can get a bond with 10% interest rate.

If hyperinflation where to kick in, I would rather own a company than own any bond. When inflation kicks in, you want to by goods.

Businesses with Debt that isn't accumulating will do very well! Their previous levels of debt will disappear, especially if they've put out long term bonds at like 7%, they're going to make a killing off the difference. Their cash flow will increase.

There are businesses you might not want to buy into during times of inflation, but lots of the market has cash on hand and the ability to pay off debt. Companies are cash rich right now, they haven't been hiring or buying that much lately.