Ask HN: Who thinks AAPL is overvalued?
Everyone who talks about AAPL here seems to be long. Is there anyone on the other side? What are the arguments?
The long argument seems clear: rapid growth, high profit margins, and plenty of room to grow indicate the P/E should be higher.
For recent history, the stock price has looked like Moore's Law. Was there a risk being eliminated over that period? Or was their success "continually surprising"?
(Are our models -- mental and computational finance -- incapable of handling Apple's level of growth?)
Would love to hear the dissenting take on this. It's hard to even find online.
17 comments
[ 2.5 ms ] story [ 38.8 ms ] threadThe target audience for the 4S is not 4 owners, it's 3G/3GS owners who have a subsidized upgrade burning a hole in their pocket.
> Sari is good for the first elitists that want to show it off, but people want to use their devices quietly- not talk to them. Although many don't want to admit it, it was a bad idea.
It's a phone. The primary purpose of a phone is to be talked to.
> When you have Gizmodo post a link to a Hitler video making fun of it immediately, you know it is bad.
The tech press is very different from the general public.
This however, is the same as any company's stock history. My argument is that the future of AAPL isn't in mobile devices (exactly) but in producing parts for it. It may be comparable to Intel sometime soon.
It is slightly different because Apple has more vertical integration and horizontal integration as well, so people buy into the Apple ecosystem. For example, I have a mac and an Android phone, but I like the way the iPhone syncs seamlessly with my mac, so I might get an iPhone when my contract is up.
Ultimately, sales/revenues and profits GROWTH determine the stock price. At their current P/E it is hard to say they are overvalued. A multiple of 16.63 (close on 10/17) is very low for a high growth tech company. In fact, McDonald's, which is considered a value stock, has a higher multiple (almost 18). And as a more relevant example, Amazon's is over 100. Apple clearly is not overvalued at this point (in my opinion at least).
Random thoughts: Apple has roughly 1 billion shares outstanding and Microsoft has 8 billion. If Apple did an 8 for 1 stock split, the price would be at $50, and no one would ask this question.
Yes, yes, "It's a great problem to have."
But only if you are an actual person.
However, Apple is a publicly traded company and different logic applies and none of the alternatives are good.
So long as Apple holds the cash, there is the implication that they lack a long term strategy in which they are confident enough to invest a large sum of money.
Conversely, if they can't spend that much cash expanding their business without announcing their plans prior to product role out unless they use it for acquisition.
The problem with acquisition is finding a plausible candidate valued at $50-$100 billion, and it is highly unlikely they can quickly buy a portfolio of smaller companies large enough to make a dent in their cash without significant risk of public failure inherent in a bad purchase.
As for paying a dividend, that suggests a lack of vision and long term strategy even more strongly than any of the other alternatives.
A large amount of cash on hand of course isn't the worst problem a company can have, but it suggest a certain degree of inertia.
First, and most seriously, I think your assessments of dividends is pretty horrible. Dividends aren't only a good way for a company to return value to investors (which a public company is legally obligated to do), it's frequently one of the most tax-friendly ways.
Secondly, you need to consider that Apple's two biggest competitors, Microsoft and Google hold large cash reserves also. It would potentially be catastrophic to has significantly less cash on hand than either. Essentially, all three companies are forcing each other to hold cash on hand.
Finally, there's a limit to how fast a company can grow, and there's a limit to what cash on hand says about a company when that company is doing quite well. Looking at a number on a balance sheet and saying "that's not going to work", when the company is turning over profits, inventing new markets, and has comparatively killer margins is wrong.
Some of AAPL's cash may have to be repatriated, at which point they'd have to pay corporate tax on it. Then the dividend would be taxed at a rate equal to income for US taxpayers. Whereas a repurchase ultimately results in capital gains, and the money may not have to be repatriated either.
[0] http://www.macstories.net/news/apple-enters-3-9-billion-doll...