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I don't see Apple "changing quickly". Worst case scenario its growth stalls.. which is happening to a degree. If growth stalls.. they will still bring in $40 Billion a year in profit.. so by 2020.. their cash hoard will be around $430 Billion....
Meaning the opening price of Apple stock tomorrow morning will roughly EQUAL it's cash hoard. It currently has about 30% of it's stock price in cold hard cash.
People are fearing Apple will become Microsoft... but Apple has larger margins and more marketshare to gain. They'll probably cede some marketshare in IPAD space... but they were very quick to come out with the IPAD mini to combat Samsung iterations.
Samsung can't be making much profit on their machines... They are falling into the Amazon trap of Revenue over profits.
I don't see Apple "changing quickly".
You could have said the same thing in 2004 in the opposite direction. Things change very quickly in this space. Where was Samsung prior to 2010? What happend to Nokia and RIM?
This isn't to say that I'd make any predictions of things going badly for Apple any time soon. They're a very well run company, even without Jobs. But they've failed to produce anything new and exciting since Jobs passed away, and the only entirely new product that they've unveiled since that event was met with scorn and derision.
They might be able to keep milking the iphone and ipad for years to come, or sentiment could turn against them overnight. Lots of companies (see: RIM and Nokia) thought that they were unassailable with loyal customers until they weren't.
The real test for Apple is to prove that they can produce new, great products without Steve Jobs. So far, they have failed to do that.
Worst case scenario its growth stalls..
No, the worst-case scenario is a massive, sudden drop in sales. Ask Nokia.
If growth stalls.. they will still bring in $40 Billion a year in profit.. so by 2020.. their cash hoard will be around $430 Billion....
They'd never sit on that much cash. With growth slowing, they'll start paying out dividends to keep shareholders pacified, and doing stock buybacks. There's no point in keeping that much cash, because the only companies that they could buy with it that make any sense would trigger anti trust issues (and Apple wouldn't want them anyway).
Apple is essentially Microsoft...
A company floundering to stay relevant, hemmoraging what talent it has left, and watching its core business gradually decay? That doesn't sound like Apple at all, actually.
but with larger magins and more marketshare to gain.
Apple has a larger share of the operating system market than Microsoft (Microsoft is now down to 18% of all personal computing devices, compared to Google's 51% and Apple's 25%). So not really.
They'll probably cede some marketshare in IPAD space... but they were very quick to come out with the IPAD mini to combat Samsung iterations.
I dunno about 'very quick' since they introduced it two years after Samsung came out with the galaxy tab. The ipad mini was clearly a response to the Nexus 7, not the galaxy tab.
Samsung can't be making much profit on their machines... They are falling into the Amazon trap of Revenue over profits.
Samsung is bringing in about $20B / year on their mobile business on revenues of $50B. It's the bulk (70%) of the company's profits. They're nothing like amazon.
Amazon didn't "fall into" anything. They're a retailer...retailers have very low margins.
Samsung made 25b last year and growing fast. Mobile is 70%. For all intent and purpose, Samsung is the most formidable tech company in the world.
I agree, Samsung will crush them all. They have been making cheap but good enough products and are to Apple what linux servers were to Sun servers - the ultimate commoditizers.
Samsung made 25b last year and growing fast. Mobile is 70%. For all intent and purpose, Samsung is the most formidable tech company in the world.
I agree, Samsung will crush them all. They have been making cheap but good enough products and are to Apple what linux servers were to Sun servers - the ultimate commoditizers.
Samsung is doing well right now, but I'd be cautious there too. They are great commoditizers, but that just means that they'll drive the margins on these devices into the ground, like what happened with PCs.
Margins on devices are already starting to decay. Look at the race to the bottom happening already: The Nexus 4 is the best android smartphone there is, and you can buy it for $300 without a subsidy. The Nexus 7 is the best android tablet there is, and you can buy it for $200 without a subsidy.
To me, it seems that the remaining profits are going to go to whoever owns the service and content ecosystems. Hardware will return to its natural low margin state. This doesn't just mean the platform owners like Apple and Google, but also service providers like Netflix and Amazon.
but that just means that they'll drive the margins on these devices into the ground, like what happened with PCs.
"Wintel" drove margins on PC's into the ground. There were plenty of profits to be made in the PC, Intel and Microsoft took most of it, leaving 5-10% to IBM, HP and Dell.
More reasons why Apple and Samsung will never go back to those days.
I dunno. The ipad mini was clearly designed as a price competitor. Samsung is already lowering the prices on their tablets in the wake of the N7 and various competitors from ASUS, Archos, and LG.
Whatever tablet margins are left will disappear over the next year. Apple may decide to copy their approach to PCs here, and remain a high margin, low market share player.
High end handsets are supported in large part by subsidies in the US (just compare sales numbers by country; high end phones don't sell well in countries without subsidies). All 4 major US carriers have indicated that they want to end the subsidy model.
Apple had a hard time selling iphones until they started getting subsidies for them. Nobody wanted to pay $700 for a phone. Once they could get it for $200-300 from AT&T, they started selling like hot cakes.
The nature of hardware is commoditization. Samsung and Apple can fight all they want, but there will always be somebody willing to go lower. Consumers are overwhelmingly willing to buy a lower quality product for a significant price cut.
I wouldn't be at all surprised if, 5-10 years from now, Apple makes a larger profit from the app store / itunes than they do on hardware.
Samsung won't allow anybody else to get the hardware profits on their devices, but that doesn't mean that they won't be willing to accept a 5% margin over all. After all, that would still be better than every other industry that they are in with the exception of financial services.
The interesting thing this time around is that there isn't anybody making a direct profit on software. Google's money comes from ads, digital content, and services. Microsoft is trying to give windows phone away for free (or even pay people to use it / sue them into using it) but doesn't seem to have any backup plan.
If Apple is a bad investment at its current price, then Samsung is an even worse investment.
Samsung has lower margins, and no premium pricing power.
Samsung doesnt control its OS... Google does.
Samsung has yet to innovate, just copied Apple.... Or made slight variations like increasing or decreasing Screen sizes.
What is going to drive growth in Samsung that wont also drive growth in Apple?
If subsidies to smartphones went away it would hurt Samsung just as much or more than Apple... Atleast Apple has some brand cache.
Buy American, buy Apple.
If Apple is a bad investment at its current price, then Samsung is an even worse investment.
Samsung has lower margins, and no premium pricing power.
Samsung doesnt control its OS... Google does.
Samsung has yet to innovate, just copied Apple.... Or made slight variations like increasing or decreasing Screen sizes.
None of these things really tells us whether Samsung is a good investment or not. Samsung is a highly diversified conglomerate. Apple makes a relatively tiny number of products. They're very different companies. Samsung was a huge (bigger than Apple at the time), profitable company long before they produced a single smartphone.
Note that, by revenue, samsung electronics (just one part of the company) is as big of a company as Apple.
What is going to drive growth in Samsung that wont also drive growth in Apple?
Processors, memory chips, hard drives, televisions, refrigerators, nuclear reactors, ship engines, financial services, insurance, heavy machinery, farm equipment, civil engineering, IT consulting, shipbuilding, construction, theme parks, advertising, airplane engines, cameras, stereos, networking equipment, clothing, chemicals, pharmaceuticals, hotels, mining, energy, water purification, and health care.
Take your pick?
If subsidies to smartphones went away it would hurt Samsung just as much or more than Apple... Atleast Apple has some brand cache.
Nope. In countries that don't have subsidies, Samsung outsells Apple by more than they do in the US. They make cheaper hardware, and only a small segment of the population is willing to pay more money for brand (nevermind quality...people make poor decisions)
Buy American, buy Apple.
How about Motorola, Vizio, or Dell?
MisdemeanorRebel
2013 Jan 24, 2:34am
I don't think it has anything to do with components as Apple can outsource that plus these arrangements are long term that benefits both sides.
They already outsource: iPhone chips are made by Samsung. There is no ready substitute if Samsung has issues, or decides to prioritize their Galaxies over supply Apple.
Many components of the iPhone are other companies' proprietary IP and not readily substituted.
The must have Apple is now nice to have. Also, with a closer replacement cycle, I think consumers stopped buying the most expensive ripoff version of the Ipad/Iphone (32GB vs. 16GB anyone) which are all profits.
Yes, right on.SFace says
Apple may have topped out at 40B - 50B in earnings. I don't how much more Iphone/Ipad they can sell in the future and not eat into their owns sales/profits. Consumers are already not buying as many macs and Ipods.
Really, the worst factor is finding another hit. I don't know where's the next ipod, next Iphone, next Ipad is.
I agree. How many more rabbits can they pull out of a hat? They had some big hits in a short time, but can they keep it up? It's hard to keep topping yourself when you're at the top of the heap.
MisdemeanorRebel
2013 Jan 24, 3:28am
Apple designed the A5 or whatever, Samsung Manufactures them. When you go into a contract to manufacturer chips, they are structured long term with tremendous exit costs with cost certainity. In the case of Apple and Samsung, probably in the billions.
Apple did NOT design the entire A4 or A5. The architecture of the 'system on a chip' is licensed from ARM Holdings. The Design of the chip itself is a collaberation with Samsung, based on requirements by Apple; additional functionalities are licensed from other firms like Audience.
The A6 is the first chip by Apple where Samsung didn't play a development role.
This is really telling, because Apple is starting to turn away from Samsung and stop letting it's #1 competitor make it's chips. This is an indicator that there is either margin pressure or some other force at work making Apple move away to other manufacturers.
RentingForHalfTheCost
2013 Jan 24, 3:31am
Now who is going to buy all the run down 1200sqft shacks in Cupertino? We just lots a boat load of greater fools in one quarterly report. Doh
yeah, $13 billion in profits in 12 weeks... Apple is really slacking.. only earning $6.5 MILLION an hour is gonna put them out of business real soon.
How much did Amazon earn in profits last quarter.. how bout Netflix?
Apple as a company is fine. It is just realizing that at 500B (now 400B) market cap, it really suffers like all those before it. Remember when Cisco hit 500B. Same story here.
I was more referring to all the Apple workers that are distorting the real-estate market in Cupertino because of the over-inflated Apple stock. At $700/sh, you can be sure there are more millionaires than at $450/sh. The trouble when people get access to large amounts of money quickly, is they don't respect what it says. Hence, everyone overpays for a sugar shack. Good luck to all the sugar shack owners out there. ;)
Apple only employs about 30000 people in Cupertino. Most don't live there. They don't exist in a vacuum.
AT&T has released its holiday quarter earnings data, reporting that it sold a record 10.2 million smartphones -- 8.6 million of those (84%) being iPhones. AT&T reported earlier this month that the quarter was its best ever for iPhone sales. 16% of the iPhones were on accounts new to the company.
During the same holiday quarter, Verizon activated 6.2 million iPhones, some two-thirds of its total smartphone sale. AT&T's previous best quarter was 2011's fourth quarter, when it activated a total of 9.4 million smartphones and 7.6 million iPhones -- an 80% share for the Apple device.
On Twitter, Apple watcher Sammy the Walrus calculated that 74% of smartphones sold by AT&T and Verizon were iPhones, giving the device an "iPod-like share".
***
So on the two largest telcos in the U.S... 74% of all phones sold are IPHONES.. and Wall Street panic sells?
curious2
2013 Jan 24, 7:04am
So on the two largest telcos in the U.S... 74% of all phones sold are IPHONES.. and Wall Street panic sells?
They might be worried about the history of Nokia repeating itself. Trees don't grow to the sky. OTOH, if I had to bet on AAPL (P/E=10) or FB (PE=289), I'd bet AAPL.
RentingForHalfTheCost
2013 Jan 24, 8:26am
Apple only employs about 30000 people in Cupertino. Most don't live there. They don't exist in a vacuum.
I never said they did. What I was insinuating was that Apple's stock has given many employees the ability to pay double or more than they should for a sugar shack in Cupertino. With this latest drop you can be sure the real estate market will suffer in that area. Back to reality sucks.
zzyzzx
2013 Jan 24, 8:52am
After Hours : 448.53 1.97 (0.44%) 7:46PM EST - Nasdaq Real Time Pric
http://finance.yahoo.com/news/samsung-posts-record-profit-000031770.html
Samsung posts record profit; will not reduce spending
SEOUL (Reuters) - Samsung Electronics Co reported a record quarterly profit of $8.3 billion and kept its 2013 investment plans at the previous year's level, defying expectations that it may reduce spending amid weaker demand for computer chips.
The South Korean firm said October-December operating profit increased 89 percent from a year ago to 8.84 trillion korean won ($8.3 billion), in line with its earlier estimate.
In a statement on Friday, Samsung said it would keep 2013 investment at a similar level to 2012, despite a bleak PC outlook and a move by rival Apple Inc to diversify its supplier base.
So on the two largest telcos in the U.S... 74% of all phones sold are IPHONES.. and Wall Street panic sells?
If only the two largest US carriers were the entire smartphone market. Or even the entire US market. Or even the majority of the US market...
Investors are making bets. They're betting that Apple's growth isn't sustainable. It's pretty simple, actually.
Apple only employs about 30000 people in Cupertino. Most don't live there. They don't exist in a vacuum.
I never said they did. What I was insinuating was that Apple's stock has given many employees the ability to pay double or more than they should for a sugar shack in Cupertino. With this latest drop you can be sure the real estate market will suffer in that area. Back to reality sucks.
Kinda depends on where the investors take their money. Most of what has been taken out of Apple has been added to Google, Facebook, and other tech companies.
Apple isn't the only game in town, or even the largest employer. Rank and file employees don't get enough RSUs to be buying million dollar houses. The overall impact will be insignificant, just like the uptick from the round of IPOs over the last couple years was insignificant.
If only the two largest US carriers were the entire smartphone market. Or even the entire US market. Or even the majority of the US market...
Investors are making bets. They're betting that Apple's growth isn't sustainable. It's pretty simple, actually.
it is the majority of the US market...
Verizon 31.3% and AT&T 26.6%... In what Universe is 58% not a majority?
Sprint is desperate to sell IPHONES because they bought so many up front from Apple. They sold 1.8 million last quarter...
Once Apple FINALLY cuts a deal with China Mobile.. The stock will pop 40-50 a share the day of the announcement.. or in the lead up to the imminent announcement.
MisdemeanorRebel
2013 Jan 25, 4:05am
So on the two largest telcos in the U.S... 74% of all phones sold are IPHONES.. and Wall Street panic sells?
If only the two largest US carriers were the entire smartphone market. Or even the entire US market. Or even the majority of the US market...
Investors are making bets. They're betting that Apple's growth isn't sustainable. It's pretty simple, actually.
Android phones are far and away the dominant phone OS.
curious2
2013 Jan 25, 4:07am
Once Apple FINALLY cuts a deal with China Mobile.
Why would China Mobile agree to overpay for a phone that they know perfectly well any 10-year-old can make?
Android phones are far and away the dominant phone OS.
So which is it.. Android is too big to grow anymore? Or Apple is too big to grow anymore.. these numbers all contradict.
Why would China Mobile agree to overpay for a phone that they know perfectly well any 10-year-old can make?
Apple only needs to get the same deal that Samsung Galaxy has over at China Mobile... If they are both subsidized equally you can let the consumers decide... if Apple's IPHONE is worth a little extra cash.
If only the two largest US carriers were the entire smartphone market. Or even the entire US market. Or even the majority of the US market...
Investors are making bets. They're betting that Apple's growth isn't sustainable. It's pretty simple, actually.
it is the majority of the US market...
Verizon 31.3% and AT&T 26.6%... In what Universe is 58% not a majority?
Sprint is desperate to sell IPHONES because they bought so many up front from Apple. They sold 1.8 million last quarter...
Once Apple FINALLY cuts a deal with China Mobile.. The stock will pop 40-50 a share the day of the announcement.. or in the lead up to the imminent announcement.
Those are percentages of post paid (contract) customers. Posy paid is only half of the market.
Quick, what's 58% of half of the market?
Those are percentages of post paid (contract) customers. Posy paid is only half of the market.
Quick, what's 58% of half of the market?
Apple is priced as if it will only experience 2% year over year growth forever... I'd be first to agree $700 a share Apple was risky in the short term.. and deserved a pullback.
But it's current price is definitely blood in the streets fear-driven and overselling.
Those are percentages of post paid (contract) customers. Posy paid is only half of the market.
Quick, what's 58% of half of the market?
Apple is priced as if it will only experience 2% year over year growth forever... I'd be first to agree $700 a share Apple was risky in the short term.. and deserved a pullback.
But it's current price is definitely blood in the streets fear-driven and overselling.
Perhaps. The question is, what happens next? If you believe that Apple's fundamentals and future are sound, and that investors are just being short sighted and will eventually come around, by all means buy.
Just remember that there are plenty of companies doing very well that have had a stagnant stock price for a very long time.
I don't buy individual stocks unless they pay a dividend for just this reason. You're betting on perception.
bmwman91
2013 Jan 27, 8:33pm
Holy shit am I glad that I am too much of a pussy to actually gamble on options. My friend that gave me that "hot tip" is going to get razzed next time we go grab beers!
Apple is not going anywhere. They are a long way off from becoming Microsoft per Kevin's earlier description, which sadly bears quite a bit of truth. Even if they did...well, MSFT is still alive. They (AAPL) make high quality hardware and their corporate culture still attracts top type-A talent, which will probably mean that they continue churning out top quality stuff. Popular sentiment toward them is shifting a little, but they still have legions of die-hard fans and brand-whore minions. Their margins are unreal for high volume consumer gadgetry, so if they ever did need to engage in a pricing battle, they have a LOT of room. I have no idea where their stock price is going, but they will remain highly profitable for quite some time I am sure.
It does seem that their stock price was blown up on expectations of unsustainable growth levels, even with their super conservative P/E. Maybe the price will keep going down, maybe it will go way up, maybe it will level off. It is hard to say since it is dependent on fickle consumer behavior and reactionary retail investors. Either way, I see Apple being consistently profitable for the near- to mid-term future.
Long AAPL @ $455. The P/E is 10 and dividend yield is over 2.3%.
The Cash value is $150 a share for Christ's sake.
What's going to happen, the P/E is going to 8?
Or 5?
Find any company with a cash value 35% of it share price that has a P/E of 10.
Tenpoundbass
2013 Jan 27, 11:43pm
iPhone losing luster in Asia's trend-setting cities
http://biz.thestar.com.my/news/story.asp?file=/2013/1/28/business/20130128080557&sec=business
In Hong Kong, devices running Apple's iOS now account for about 30 percent of the total, down from about 45 percent a year ago. Android accounts for nearly two-thirds.
Here's a really interesting article about what Apple does with its CASH MONEYS...
zzyzzx
2013 Feb 1, 12:31am
http://finance.yahoo.com/news/anlaysis-funds-saw-apples-decline-174717417.html
Analysis: The funds that saw Apple's decline coming
Whether it was a case of simple risk management, concerns that the company's share price had peaked, or a bit of luck, fund managers who drained Apple from their portfolios helped drive down the price of the stock. As a result of their early shift in sentiment, they appear quite prescient now.
Denver-based fund manager Tom Marsico sold his firm's entire stake in the company between November and January - most of it in November before things got really ugly. At about $2 billion of the firm's $31 billion in assets under management, the Apple stake made up between 6 to 8 percent of the domestic portfolios at the time he began selling.
His concern: that the company had saturated the market with its products so much that there was "no one left to sell to."
Marsico, the Denver-based manager, began selling his position in the company when it traded at around $650 per share out of concern that its years of phenomenal growth were over.
"We didn't see another major category that would provide the opportunity that the iPhone has had for the company," he said.
The company's strong lineup of current products didn't entice him to stay invested. "They've talked about the fact that they have the best products they've ever had. But I remember you could say the same thing about Sony 20 years ago," he said.
Some managers trimmed their overweight positions, but were held back from selling more because of the company's massive pile of cash. Daniel Rosenblatt, a portfolio manager of the $639 million Neuberger Berman Large Cap Disciplined Growth fund, began trimming his position in Apple by approximately 10 percent, from 8.1 percent of assets to 7.2 percent of assets, as the company approached its high. The company, which had been among the fund's largest positions since 2004, was "clearly in a deceleration mode", Rosenblatt said.
He was most troubled by surveys that showed that even die-hard Apple fans were more open to using rivals' products. "When a product loses a certain amount of cool, its pricing power falls," he said. Yet he won't short the stock or sell more because the company's large cash position, which makes up about a third of its market value, "could change the dynamics of the stock price overnight" via a big buy-back or acquisition, he said.
bmwman91
2013 Feb 7, 6:03am
So, there's a potential game-changer coming for AAPL stock prices. Greenlight Capital is filing a suit against Apple for not doing enough to pump its share price, and apparently Apple is considering letting shareholders vote themselves into juicy shares of dividend-paying preferred stock. What will happen next is anyone's guess. Basically, they are under fire now to pump the shit out of their stock to appease shareholders, more so then ever. Time to make some popcorn...
anotheraccount
2013 Feb 13, 8:19am
The biggest wildcard is the compression of margins. I just bought an iPad mini and Google Nexus 7. For many people it's becoming harder to justify to pay for a bigger iPad with more memory when you can get pretty much the same thing cheaper.
The stock may be due for a bounce soon, but after that don't be surprise to see the stock reaching close to $200/share within a year's time or so.
I loved what Jobs did, but the stock is broken after what the hedge funds did to it in 2012 above the 460+ island ramp job to $700.
People spend billions on watches because a $10000 watch is a high end piece of jewelry. A $200-300 watch will never fit that category. You can't brag about the techie equivalent of a Timex.
Smart watches could be interesting, but it'll take a really killer app to make them shine.
bmwman91
2013 Mar 3, 7:03am
Honest to god, this is a vastly superior product to what it sounds like Apple is making. Who the FUCK wants to charge their goddamn watch every day?! Surf the web on a 1" screen? Riiiiight. I am not saying that there won't be some amazing technology baked into an incredibly small package by Apple's iWatch, but it seems like a completely impractical gimmick.
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Starting my New Year with a nice bump on the AAPL I picked up last year.
Consensus on AAPL to $500? It's testing 52-week high.