am I the only one who considers the markets obsession of endless growth as absurd?
Both sides in the smart phone market have been growing thru beating down the weaker competitors then just by market growth, the smart phone market in developed countries is largely reaching saturation - where is the place to grow now?
I work in a market where volume matters little - margin is the key - my division for example produces a product with a gross margin of ~50%
If I were an investor in your company and I got a healthy dividend from that gross margin then that'd be great. But public stocks largely don't pay significant dividend and are valued off of growth. Growth expectations which are already factored into the price, whatever it may be.
> am I the only one who considers the markets obsession of endless growth as absurd?
Likely not however we're only talking stock price here and the only thing that matters in investing in stocks in finding your way back to a return which typically happens when stock prices go up and you can sell higher or you get a dividend. Since Apple doesn't do the latter it has to do the former which means requires constantly growing the company.
So while in logic the endless growth is a bit absurd in the stock market it's either that or dividends (and even dividends may not keep it raising; all depends on how they're structured).
Not necessarily. A stock represents the market's valuation of a company, including its future earnings.
Maybe a plateau to growth is already factored into the market's valuation of Apple (arguably, you'd have to be an idiot to think that Apple's cash cow will grow forever and magically never reach saturation). The stock's value could continue to hold steady and even grow while the company's revenue declines if that decline is less than expected.
One thing about Apple is this: they _always_ have a plan. Count on it. It's not like Business Insider is uncovering something they don't know here. All this doomsaying is due to the fact that Apple does not pre-announce anything. This, understandably, drives mass media nuts, so they just make things up. But that doesn't change the basic truth of the issue: Apple always has a plan.
I've heard this almost every year, and almost every year it turns out to be an incorrect assumption and as Aloha pointed out here - what is the obsession with growth?
Growth means return on investment. You gotta go in the public markets if you want to make a good return. That or dividends or a company being sold (which is obviously not going to happen to Apple).
Apple doesn't necessarily need to grow its revenue in order to provide ROI.
They could merely decline/plateau at a slower rate than the market has priced it at. Or they could use their gobs of cash to continue the buyback program.
In fact, Apple's buyback program is expected to reach $200 billion by 2017. Even if Apple's revenue stopped growing tomorrow, they would throw off enough money to run a huge buyback program for years to come.
A 40% increase over today's closing price? And a 10% increase over Apple's highest on record? There's no market reason to believe that.
Even if I had insider information that Apple had a "game changing" product or device, I still think $144.42 is unlikely, and there are no rumours to suggest that.
I have no reasons to believe I know anything about the markets/apple/stocks/investing, but who would have thought the market would actually value essentially iPhones more than oil (and this was before this whole oil-supply-crisis we're in)? If sales turn out to be growth (which, as other commenters have pointed out it probably will since it's doom/gloom every year and every time) then the market will rejoice and probably drive it up to that height. Some big-investors thought it'd get to $250(!) a share. I think they were full-of-it, but the market responds in strange ways and 144 isn't too far from their height to reach if there isn't a major economic event that changes things in the meantime.
One, it's pretty absurd to say that the IPhone is the "best" smartphone on the market. It did a lot well as far as marketing and design, but the rest of the market has caught up and now surpassed Apple.
Two, it's well documented that Apple can't even execute on their strengths anymore. They've made a series of poor design choices, and they've been largely unable to create new markets with items like the Apple Watch.
Bubble or not, the economy as a whole is certainly up. There is plenty of room for it to go crashing down, and with it things like emerging markets and discretionary income to be spent on iphones. Despite the surprisingly reasonable P/E, I'm bearish on Apple on a timeframe of more than a year or two.
I'm no Apple fan or user, but these reasons are vapid:
- iPhone in the "negative" which sounds, well, negative but actually means that GROWTH has stopped. However it remains one of the most profitable smartphones with a giant market share, so shareholders may wish to change their medium term valuations, but frankly any valuation which ignores market saturation isn't worth considering anyway.
- Apple Watch isn't a hit... Alright, but Apple Watch 1.0 was NEVER going to be a hit. A lot of people skip the first gen because they look at history (iPhone 1, iPad 1, etc) and with a smartwatch in particular there's a lot of reason to think the technology can move forward (12 hours battery life?!). Apple Watch 2 is due out this year, and while I have no idea if that will be a hit, it COULD be.
- "Apple's software and services — Apple Music, Maps, Health, Photos — are just OK." Maps, Health, and Photos were never profit makers. Everything I've read about Apple Music has been quite positive and they've already grabbed a large amount of market for being a relatively new player. Why is the article bundling profitable business avenues with unprofitable freebies? Why is it just "ok?"
I agree with the article that 2015 was a boring year for Apple, but I think they're jumping to a lot of conclusions about 2016, and if half the rumours about the next iPhone turn out to be true then it could be popular. With the 2016 Apple Watch, it needs at minimum to have better battery life, maybe round, maybe new functionality/sensors.
This entire article only exists because the market has a fetish for growth. Even if Apple becomes completely stagnant, it is stagnant for a HUGELY successful company that competes in multiple sectors. And it isn't like they're getting eaten by things like inflation (prices have risen) or actual decline (in real terms or not), so I think rumours of Apple's demise or even having a bad 2016 are greatly exaggerated.
PS - And don't get me started on how massively successful Apple has been with vertical integration as a growth vector.
The iPhone 6S is truly an amazing piece of hardware; there is so much internal enhancement over the iPhone 6. Yet Apple hardly hyped it in that way. I got my wife a 6S for Christmas and what convinced me was what I know about it that didn't come from Apple.
The majority of iPhone users have no desire nor ability to understand the engineering genius that went into the internal design, and that is fine. And that is why Apple don't usually advertise those things when they present the new features. "It has a really awesome SoC" won't really cut it for most people.
My impression of the iPhone's tick-tock release cycle is that the number-increment releases are actually intentional efforts of product design... while the "S" releases are actually forced on Apple by the extremely tight supply chain they've set up for themselves.
The moment it becomes more cost-efficient to buy a bunch of some new components early, Apple does so—but then the cost of having them sitting around doing nothing when they could be put to use steadily rises. Meanwhile, it can also become increasingly expensive to keep ordering "old" components for your existing design, because the rest of the industry has moved on from using that component and you're the only one the suppliers are still producing it for, and they really want you off it too so they can shut that line down. Together, these effects imply that it actually becomes cost-effective from an operational logistics perspective to refresh the iPhone's hardware each year, even if the "design plan" is written in terms of two-year milestone releases. Whatever ends up being cost-effective to put into the interim refresh gets advertised on stage, but—unlike the actual "planned" releases—it's effectively random, rather than a "curated" list of features that go together to form a whole.
Or, to put it another way—Apple likely went to the drawing board and designed the iPhone 7 right after the release of the iPhone 6. Some random subset of the components of the iPhone 7 ended up "resolving" early enough that they got "binned" together as the iPhone 6S. Whatever components didn't become available in time for the 6S release, are now waiting until the 7.
When you see a number-increment release like the 6 or the soon-to-be 7, imagine that all the features that went into the previous "S" release were also announced on stage at the same time that they announced whatever did go into it. Because that's what Apple intends to happen; together, the 6S's features and the 7's features (or the 5S's features and the 6's features, etc.) add up to a coherent and compelling product vision. The "S" release just takes a random bite out of that vision and sputters it out early, leaving the actual numbered release to say whatever's left over.
They do have debt now, they took out loans worth tens of billions in US and a few other countries in order to avoid bringing in money oversea. I believe they're at 40-50$ billions in debt now.
Yes, they have very low interest rates on these loans and probably can pay them all off once the oversea profits come into US at a loss of 40% tax but they're technically debts.
a·nal·o·gy
noun: analogy; plural noun: analogies
a comparison between two things, typically
on the basis of their structure and for
the purpose of explanation or clarification.
p.s. you should pay Heroku the $7/month so that your business website doesn't sleep after n minutes.
It is obvious that eventually the sales of any product, even the iPhone would eventually plateau. This means of course, the stock value would be no longer determined by some fancy dreams of growth but the actual financials of the company. With the share price going down, the resulting hit might have already happened. But this still would mean that the most profitable company plateaus, not a bad place to be.
Also the outlook isn't so bad either. The iPhone 6 sold much better than all analysts predicted and I wouldn't be surprised if the 6s might not even beat it - a lot of the iPhone users who did not have a 6 were upgrading this year (including myself). And with the 7 we might get the 6 owners renew after 2 years.
The iPad sales have been slow - I myself haven't upgraded my iPad 3 yet - but if the Pencil technology comes to the full line up, it could drive a lot of interest into renewing.
And while the Apple Watch might not large by business volume yet, it owns the large part of the smartwatch market. There will be huge improvements with the next generations, so a lot of growth there. Also you cannot use the Apple Watch without a modern iPhone, so with the iPhone renewals there are more potential customers.
Maybe iPhone growth stalls this year sure but I wouldn't bet a single dollar based just on "supply chain reports" which have turned out to be nothingburgers as often as not.
My own prediction for Apple in 2016 is that the iPad returns to growth this (calendar) year.
The headline should be Apple stock will have a tough year not Apple. Although the future growth decline has already been priced into Apple stock onea of the reasons it P/E ratio is so low compared to many like Google.
Utter nonsense, pure clickbait froth. The watch is a great v1 product (read some iPhone v1 reviews and compare) and the new model should be announced soon. The new atv is FANTASTIC, and at $149 they will sell a ton of them. And the iPad Pro is getting rave reviews, though the price point means I think it'll be another generation before the new stuff makes it into the cheaper models and makes a big bump in the iPad numbers.
I'd say apple is poised for a great year, unless the world economy goes pop, which might well happen but can't be helped.
37 comments
[ 4.3 ms ] story [ 85.6 ms ] threadI do agree that their software has taken a huge nosedive. Their major attempts at initiatives have been poorly executed.
Both sides in the smart phone market have been growing thru beating down the weaker competitors then just by market growth, the smart phone market in developed countries is largely reaching saturation - where is the place to grow now?
I work in a market where volume matters little - margin is the key - my division for example produces a product with a gross margin of ~50%
Likely not however we're only talking stock price here and the only thing that matters in investing in stocks in finding your way back to a return which typically happens when stock prices go up and you can sell higher or you get a dividend. Since Apple doesn't do the latter it has to do the former which means requires constantly growing the company.
So while in logic the endless growth is a bit absurd in the stock market it's either that or dividends (and even dividends may not keep it raising; all depends on how they're structured).
Not necessarily. A stock represents the market's valuation of a company, including its future earnings.
Maybe a plateau to growth is already factored into the market's valuation of Apple (arguably, you'd have to be an idiot to think that Apple's cash cow will grow forever and magically never reach saturation). The stock's value could continue to hold steady and even grow while the company's revenue declines if that decline is less than expected.
Growth. You mean sales growth. So call it that. There's enough innumeracy and economic illiteracy out there -- let's not add to it, eh.
Growth does not equal stability.
Growth means return on investment. You gotta go in the public markets if you want to make a good return. That or dividends or a company being sold (which is obviously not going to happen to Apple).
They could merely decline/plateau at a slower rate than the market has priced it at. Or they could use their gobs of cash to continue the buyback program.
In fact, Apple's buyback program is expected to reach $200 billion by 2017. Even if Apple's revenue stopped growing tomorrow, they would throw off enough money to run a huge buyback program for years to come.
EDIT add "this year"
Even if I had insider information that Apple had a "game changing" product or device, I still think $144.42 is unlikely, and there are no rumours to suggest that.
One, it's pretty absurd to say that the IPhone is the "best" smartphone on the market. It did a lot well as far as marketing and design, but the rest of the market has caught up and now surpassed Apple.
Two, it's well documented that Apple can't even execute on their strengths anymore. They've made a series of poor design choices, and they've been largely unable to create new markets with items like the Apple Watch.
Bubble or not, the economy as a whole is certainly up. There is plenty of room for it to go crashing down, and with it things like emerging markets and discretionary income to be spent on iphones. Despite the surprisingly reasonable P/E, I'm bearish on Apple on a timeframe of more than a year or two.
- iPhone in the "negative" which sounds, well, negative but actually means that GROWTH has stopped. However it remains one of the most profitable smartphones with a giant market share, so shareholders may wish to change their medium term valuations, but frankly any valuation which ignores market saturation isn't worth considering anyway.
- Apple Watch isn't a hit... Alright, but Apple Watch 1.0 was NEVER going to be a hit. A lot of people skip the first gen because they look at history (iPhone 1, iPad 1, etc) and with a smartwatch in particular there's a lot of reason to think the technology can move forward (12 hours battery life?!). Apple Watch 2 is due out this year, and while I have no idea if that will be a hit, it COULD be.
- "Apple's software and services — Apple Music, Maps, Health, Photos — are just OK." Maps, Health, and Photos were never profit makers. Everything I've read about Apple Music has been quite positive and they've already grabbed a large amount of market for being a relatively new player. Why is the article bundling profitable business avenues with unprofitable freebies? Why is it just "ok?"
I agree with the article that 2015 was a boring year for Apple, but I think they're jumping to a lot of conclusions about 2016, and if half the rumours about the next iPhone turn out to be true then it could be popular. With the 2016 Apple Watch, it needs at minimum to have better battery life, maybe round, maybe new functionality/sensors.
This entire article only exists because the market has a fetish for growth. Even if Apple becomes completely stagnant, it is stagnant for a HUGELY successful company that competes in multiple sectors. And it isn't like they're getting eaten by things like inflation (prices have risen) or actual decline (in real terms or not), so I think rumours of Apple's demise or even having a bad 2016 are greatly exaggerated.
PS - And don't get me started on how massively successful Apple has been with vertical integration as a growth vector.
The moment it becomes more cost-efficient to buy a bunch of some new components early, Apple does so—but then the cost of having them sitting around doing nothing when they could be put to use steadily rises. Meanwhile, it can also become increasingly expensive to keep ordering "old" components for your existing design, because the rest of the industry has moved on from using that component and you're the only one the suppliers are still producing it for, and they really want you off it too so they can shut that line down. Together, these effects imply that it actually becomes cost-effective from an operational logistics perspective to refresh the iPhone's hardware each year, even if the "design plan" is written in terms of two-year milestone releases. Whatever ends up being cost-effective to put into the interim refresh gets advertised on stage, but—unlike the actual "planned" releases—it's effectively random, rather than a "curated" list of features that go together to form a whole.
Or, to put it another way—Apple likely went to the drawing board and designed the iPhone 7 right after the release of the iPhone 6. Some random subset of the components of the iPhone 7 ended up "resolving" early enough that they got "binned" together as the iPhone 6S. Whatever components didn't become available in time for the 6S release, are now waiting until the 7.
When you see a number-increment release like the 6 or the soon-to-be 7, imagine that all the features that went into the previous "S" release were also announced on stage at the same time that they announced whatever did go into it. Because that's what Apple intends to happen; together, the 6S's features and the 7's features (or the 5S's features and the 6's features, etc.) add up to a coherent and compelling product vision. The "S" release just takes a random bite out of that vision and sputters it out early, leaving the actual numbered release to say whatever's left over.
Apple is going to be fine.. They carry very little /no debt and make the best phone in the world that magically becomes obsolete in 14 months..
I can't imagine a better business to be in and dominate.
Yes, they have very low interest rates on these loans and probably can pay them all off once the oversea profits come into US at a loss of 40% tax but they're technically debts.
Also the outlook isn't so bad either. The iPhone 6 sold much better than all analysts predicted and I wouldn't be surprised if the 6s might not even beat it - a lot of the iPhone users who did not have a 6 were upgrading this year (including myself). And with the 7 we might get the 6 owners renew after 2 years.
The iPad sales have been slow - I myself haven't upgraded my iPad 3 yet - but if the Pencil technology comes to the full line up, it could drive a lot of interest into renewing.
And while the Apple Watch might not large by business volume yet, it owns the large part of the smartwatch market. There will be huge improvements with the next generations, so a lot of growth there. Also you cannot use the Apple Watch without a modern iPhone, so with the iPhone renewals there are more potential customers.
Eventually, probably, if by "plateau" you mean "decelerate."
> This means of course, the stock value would be no longer determined by some fancy dreams of growth but the actual financials of the company.
LOL. Apple's P/E is 11.45. Google's is 35.69. Microsoft's is 37.28. Facebook's is 105.14. Amazon's is 980.46. The S&P 500 average is 21.54.
Which of these has "fancy dreams of growth" again?
My own prediction for Apple in 2016 is that the iPad returns to growth this (calendar) year.
I'd say apple is poised for a great year, unless the world economy goes pop, which might well happen but can't be helped.