Another boring money post

[Partial]

"RBC Capital Markets sees Apple earning $110 billion in revenue in fiscal 2011, growing to $140 billion in revenue the following year, and $167 billion by fiscal 2013. It has a $500 price target for AAPL stock."

http://www.appleinsider.com/articles/11/09/13/unprecedented_demand_for_apples_iphone_5_exceeds_iphone_4_hype.html

167 billion at 25-30% operating margin is just incredible. The race to $1000 continues!

[3irty1]

I believe they finally passed 50%. It's GROWING. Read quotes from CEOs like Motorola Mobility, Google, Apple, etc. This is a post PC era. Within 5 years people won't have notebooks at work, they'll have smart phones with a dock for a keyboard and external display. This is happening now. Who's leading the charge?? Apple.

Well I googled for it and the number I saw was 40%. I'm sure it is growing but by no stretch of even your imagination could a smartphone be considered "essential to the average consumer" nor should their manufacturers be labeled as "recession proof." As for all your futurist stuff, we'll see but the prediction that iphones will replace the windows PC's and laptops currently used in business within 5 years reeks of typical fanboy none sense.

Realities of the company? What does this even mean?

Apple ever being undervalued is about as likely as ever getting good superbowl odds on the Dallas Cowboys--the fan bases of each make it impossible. All financial institutions that I know of are based on the idea that humans are always logical with their money. Humans of course are actually human with their money and the stock market is a way to capitalize on such. Apple has such an unparalleled following of loyal fans that the stock will always be extra risky just because of that. If its not a bubble already it is virtually guaranteed to become one eventually. You're citing stock information that you got off of appleinsider.com for beltsakes... you understand the conflict of interest there right?

The economy? Apple has blown up as much as anyone in a down economy. People need computers, and in the post-PC era, people "need" smart phones. This isn't going to change. It's naive to expect the explosive growth of smart phones to stop or even slow. Simply ridiculous, in my opinion. This train isn't stopping anytime soon.

I'd buy too if I seriously thought that iphones and ipads were going to replace all phones, all educational and buisness computing devices, and all pants. The main problem I have with that is that it's insane. Almost as insane as saying an expensive and luxurious cell phone is essential to most people. I'm sure in the Dutch Golden age people probably said stuff like this:

"The economy? Tulips have blown up as much as anything in a down economy. People need tulips, and in the post-war era, people "need" multi-colored tulips. This isn't going to change. It's naive to expect the explosive growth of tulips to stop or even slow. Simply ridiculous, in my opinion. This boat isn't stopping anytime soon."

Fundamentals of the stock market?? What does this even mean? I can only assume that you don't expect AAPL to continue to blow up. I would bet my bottom dollars Apple hits 1000 soon. It's price is ridiculously out of sync with what it should be for a company of it's size, profitability, growth, revenue, etc. It is crazy under-valued.

To make a killing the likes of which you are predicting in the market a company has to do better than the vast majority thinks it will. I do expect apple to continue to blow up, then I expect it to pop. Go ahead and bet your bottom dollar on it and ride it to prosperity, just watch it closely and get out before appleinsider.com tells you to.

You're only going to be able to get a smart phone soon. Perhaps the smart phones of today will be the dumb phones of tomorrow. I don't see how using an iPhone is any more challenging than using a dumb phone. I can absolutely see how using an Android phone is like using linux on a computer aka a horrible experience for the user.

Not sure what you mean by soon but as long as there are people who will only pay between $15 and $40 per month for a phone there will be dumb phones. Right now that number is over half of the population. I've never used an android phone but you know that linux is my jam so that last sentence is probably lost on me. Linux is a pretty big umbrella to label all of it as a "horrible experience on a computer." My girlfriend and 3.5 year old neighbor girl both use ubuntu 11.04 without complaints.

[Patler]

"RBC Capital Markets sees Apple earning $110 billion in revenue in fiscal 2011, growing to $140 billion in revenue the following year, and $167 billion by fiscal 2013. It has a $500 price target for AAPL stock."

http://www.appleinsider.com/articles/11/09/13/unprecedented_demand_for_apples_iphone_5_exceeds_iphone_4_hype.html

167 billion at 25-30% operating margin is just incredible. The race to $1000 continues!

There is a saying among analysts that, in the long term, the market is never wrong. What they mean is that the market determines the share price, regardless of what analysts think the price should be. So the market is never wrong, but analysts often are wrong.

So far, over the last two years or so, AAPL has climbed steadily, and that is a good thing. Momentum is a good thing. But, AAPL has missed the analysts share price targets continually. In spite of significant "beats" on earning estimates, the stock has moved upward more slowly than analysts have predicted, and that is a bad thing, because analysts' share price estimates are based on their earnings estimates. While AAPL has exceeding the analysts earnings estimates significantly, the share price has not hit the analysts targets.

In other words, the market has been less impressed with AAPL's performance than the analysts have been. That makes AAPL a stock that should be watched closely. If they ever barely beat the consensus earnings estimates, or miss it, the stock could top out. In short, the market may determine the "correct" P/E for AAPL to be far different than analysts think it should be.

The outlandish sales estimates like what you quoted give me concern as an investor. The more aggressive the analysts become in their sales estimates, the more likely it will be that AAPL will miss one. A miss from a company that has routinely beaten estimates by a lot will stop the share price momentum dead in its tracks.

[Partial]

Well I googled for it and the number I saw was 40%. I'm sure it is growing but by no stretch of even your imagination could a smartphone be considered "essential to the average consumer" nor should their manufacturers be labeled as "recession proof." As for all your futurist stuff, we'll see but the prediction that iphones will replace the windows PC's and laptops currently used in business within 5 years reeks of typical fanboy none sense.

I have no idea if it will be an iPhone. It probably won't be. 10 years is a long way away. One thing is for sure, though: It will be a smart phone in a dock. That one you can write in ink. That's happening.

Apple ever being undervalued is about as likely as ever getting good superbowl odds on the Dallas Cowboys--the fan bases of each make it impossible. All financial institutions that I know of are based on the idea that humans are always logical with their money. Humans of course are actually human with their money and the stock market is a way to capitalize on such. Apple has such an unparalleled following of loyal fans that the stock will always be extra risky just because of that. If its not a bubble already it is virtually guaranteed to become one eventually. You're citing stock information that you got off of appleinsider.com for beltsakes... you understand the conflict of interest there right?

Go to finance.yahoo.com and look at the PE. Look at the PEG. Look at the articles they link to analysts. You'll see 12 month estimates in the 600s. Those are conservative in my opinion. My love of Apple products makes it a smart decision to consider investing. My knowledge of basic math and economics makes it a smart decision to invest. I wouldn't invest in something just because I like their products. I have to see the value in it. Let's say hypothetical I was a staunch Windows supporter... I would still think that AAPL is a great investment because the math behind it makes sense. The PE and PEG are so out of whack and their forecasts are simply awesome. If it weren't for AAPL, I would have a ton of money in GE because it is extremely undervalued right now as well when you factor in their dividends. That is a fantastic investment now.

I'd buy too if I seriously thought that iphones and ipads were going to replace all phones, all educational and buisness computing devices, and all pants. The main problem I have with that is that it's insane. Almost as insane as saying an expensive and luxurious cell phone is essential to most people. I'm sure in the Dutch Golden age people probably said stuff like this:

iPad is going to own education. You wait and see. It's already happening. Smart phones are quickly killing the feature phone. 5 years from now, the low end feature phone will be a smart phone of today.

You're not looking forward. You're looking at today and the past. This technology is evolving FAST. You should follow some of the execs of these companies on Twitter. Rahul Sood @rahulsood is an excellent example. He's an exec from MS that gets it. An excellent follow on general business/technology stuff. He's a change agent who gets it. This is a post PC world. Companies are either going to evolve or die. NOW is the time to act, not 5 years from now when the wheels are too far in motion.

"The economy? Tulips have blown up as much as anything in a down economy. People need tulips, and in the post-war era, people "need" multi-colored tulips. This isn't going to change. It's naive to expect the explosive growth of tulips to stop or even slow. Simply ridiculous, in my opinion. This boat isn't stopping anytime soon."

What?

To make a killing the likes of which you are predicting in the market a company has to do better than the vast majority thinks it will. I do expect apple to continue to blow up, then I expect it to pop. Go ahead and bet your bottom dollar on it and ride it to prosperity, just watch it closely and get out before appleinsider.com tells you to.

Well obviously, everything that goes up comes down. That doesn't mean it's happening today or tomorrow. They have this market by the balls and are so far ahead of the competition they will kick ass for at least 3-4 more years. AAPL is gonna hit 1000. It's a very safe bet for the next few years. Google doesn't understand user experience, so they don't have a chance long term.... Microsoft is Apple's biggest threat in this space because Windows Phone 7 and Windows 8 are beautiful and innovative. Google has made the new beige box. Crazy to think that MS gets it before Google, but then again they have visionary execs like Rahul Sood who understand that user experience is king.

Not sure what you mean by soon but as long as there are people who will only pay between $15 and $40 per month for a phone there will be dumb phones. Right now that number is over half of the population. I've never used an android phone but you know that linux is my jam so that last sentence is probably lost on me. Linux is a pretty big umbrella to label all of it as a "horrible experience on a computer." My girlfriend and 3.5 year old neighbor girl both use ubuntu 11.04 without complaints.

Ubuntu is still a disaster for the average consumer. The user experience isn't there. To be fair, I haven't used it since Jaunty Jackalope, so perhaps you know longer have to use apt-get and what not to install stuff.

Steve Jobs was right in his assessment that file systems and computers in general are too hard. Of course, we're tech savvy so we understand it, and are capable of using them just fine. That doesn't mean that they're designed in the right way, that means that they're designed in a way that we are familiar with and can use. The Post-PC world is changing this game. App stores and sandboxed applications are changing this game. iCloud, automatic document synching, etc are changing this game. In OS 10.7, you don't even have to save documents. It's pretty wild, but the OS just handles it for you. When you think about it, why wasn't it like this the entire time?? The game is changing man. The age of user experience is upon us. MS and Apple get it. Windows 8 looks incredible when you run things in the Metro UI skin. Hopefully most applications can run in it.

Data plans are a rip right now, I agree. Wireless broadband internet is going to surpass wired broadband soon, and prices will come down and competition and new technology adoption occurs. LTE is cheaper to provide than 3G, for example. By 2015 mobile internet use will surpass wired. http://www.bgr.com/2011/09/12/u-s-to...2015-idc-says/

Dumb phones are going to go away. You can be assured of that.

Crazy times we're living in. The world is changing more rapidly then ever. Technology is in a renaissance and it's a great thing. I was reading a blog post about how we've entered a time where technology is fast enough now that what differentiates between the products is user experience. While I don't agree that tech is adequately fast (Hardware constantly needs to be improved, this is something that I love about Apple, there mobile chips smoke the competition - this pushes tech forward), it's pretty crazy to think that we've entered a time where everyone can essentially be on a level playing field in terms of hardware speed and reasonably close on price, and we'll see who succeeds based on who can provide the best experience to the user. Ultimately, I think this is going to be a problem with Android. I don't think people want a Tron UI (honeycomb), and I don't think people should have to use advanced task manager to manage there memory. With WP7 and iOs, the OS provides a clean, fast interface and gets out of the way. It's a beautiful thing.

Patty, I agree about the expectations and the market dictating the price. The market will correct itself, though, and that's when we'll make our big time money. GE and Apple's PE is all out of whack right now. Anybody with a pair of eyes with the names of large, successful companies can see this easily.

[mraynrand]

I have no idea if it will be an iPhone. It probably won't be. 10 years is a long way away. One thing is for sure, though: It will be a smart phone in a dock. That one you can write in ink. That's happening.

The faster that happens the better. However, with my experiences with rate and tax and sur charges, I'm not looking forward to the day that everything is in the cloud and pay-for-service. I think they are going to gouge the hell out of us. And then, much like ATMs, credit cards, and bank fees, they will legislate it so that the ants pay for the locusts.

[Zool]

Wow its like he never left.

Ziggy, why do you try to argue about F'in everything. You have no idea what you are talking about. Tits or wheels, I guess.

That part was fucking amazing to read.

Partial, you have no idea what the average consumer of electronics is apparently.

Ziggy, the Apply computers are priced right along side the comparable Windows(can we fucking stop calling it PC and Mac already? PC is a person computer. Is an Apple impersonal? Fuck.) computer in the laptop market. In the desktop market Apple is still quite high because you can build your own monster Windows/Linux PC for way less with the identical hardware.

The reason there are lower cost Windows laptops is the hardware inside. Both sides build about the same cost into the laptop for the OS. The rest is hardware and R&D.

[Partial]

The faster that happens the better. However, with my experiences with rate and tax and sur charges, I'm not looking forward to the day that everything is in the cloud and pay-for-service. I think they are going to gouge the hell out of us. And then, much like ATMs, credit cards, and bank fees, they will legislate it so that the ants pay for the locusts.

I worry about that too. Data plans today are absolutely ridiculous. This is why I don't own an iPhone. Don't want to pay big bucks for the wireless when I'm surrounded by wifi all day. I don't understand how these carriers aren't hauling in ridiculous profits.

Having said that, I have to imagine that someone will disrupt this market. In the next few years, someone will introduce shared data across multiple lines that will bring the price down. After that, companies will be able to buy large data blocks. As LTE and the future gens of wireless progress, the cost to provide the data will become cheaper and cheaper. Hopefully that helps.

[3irty1]

You're really in love with PEG ratio. I'll tell you why I'm not impressed. Predictions for Apple's growth like any company's growth are affected by investor hype. With Apple and its cult-like investors the hype is insane enough to make these growth predictions wronger than usual. We're also talking about an established company not some midget, you'd have to believe that Apple is going to take over the world to think it still has obscene growth potential.

Tulip mania is the classic example of an economic bubble. Where excessive positive feedback from which optimistic investors can buy with the intention to sell to even more optimistic investors. When you run out of super optimistic investors, the music stops and lots of people are left with an investment that had become unhinged from its intrinsic value. In the 1600's in Holland this happened with tulip bulbs which became somehow valued at many times more than the yearly salary of a working class citizen. Apple's investors are more prone to this because to way too many of them AAPL isn't just another stock. They are fans like you. Pack that kind of optimism into a market's participants and you've got the recipe for a bubble. Even if the shares are only slightly overvalued now, its likely that they eventually will be regardless of the business's actual performance. That's the thing about bubbles is that they don't reveal themselves until they pop--in the meantime people think that 5 years of salary for a tulip bulb is a smoking deal. The dangers of mixing money and emotion is something to think about at least. This is why I never bet on the Packers, its more than an investment to me because I'm always wearing Green and Gold glasses.

I'm not so sure the price will ever come down on any o f it. Since I've had a cellular phone, the price has only gone up. If there was a legit interest in providing the most kickass phones for a lower monthly rate, wouldn't I be able to get a feature phone with GPS/wifi connectivity and the works? I mean that'd be 75% as useful as a phone with a data plan but 50% cheaper. Hope you're right about them going away because right now feature phones have just enough features to be the worst of both worlds. Touch screens are only as good as the software behind them and mine is the worst.

Well even back in the Jaunty days, apt-get could be handled by the synaptic package manager but these days its being slowly changed into "Ubuntu software center" which is essentially a knockoff of the apple app store filled with open source binaries and even some commercial ones. They have a completely new UI packaged with 11.04 instead of classic gnome. Dunno if you'd like it or not but Its certainly evolving much much faster than any other major OS. If it hasn't caught up yet then it will soon and the consumer's choice will boil down to "pay" or "free." The cloud trends that have us doing everything through a browser anyways benefit no OS more than Ubuntu.

[Deputy Nutz]

A home OR TWO for $60K??? Are you kidding??? You can barely sneeze at one mortgage for that.

?????

Yes, actually you can. Not nice homes that you want to raise your family in, but homes you could fix up and sell or rent.

[Partial]

You're really in love with PEG ratio.

94% of stocks follow it historically I've read. Rightfully so, it's an incredible indicator.

I'll tell you why I'm not impressed. Predictions for Apple's growth like any company's growth are affected by investor hype. With Apple and its cult-like investors the hype is insane enough to make these growth predictions wronger than usual. We're also talking about an established company not some midget, you'd have to believe that Apple is going to take over the world to think it still has obscene growth potential.

The majority of AAPL is not held by individuals. Investment houses are not fanboys. They're investing to make money. People take their allegiances out of the equation when investing anyway. You're misinformed about this.

Look at what the analysts are predicting. They had 100% growth in the past year for the most part. They'll have huge growth next year. And more the next. This isn't just one analyst. This is pretty much every analyst. Go on yahoo finance. I think they've reported that 50 out of 50 investment groups call it a Strong Buy. I haven't checked the page in a few days so it may have changed.

Well even back in the Jaunty days, apt-get could be handled by the synaptic package manager but these days its being slowly changed into "Ubuntu software center" which is essentially a knockoff of the apple app store filled with open source binaries and even some commercial ones. They have a completely new UI packaged with 11.04 instead of classic gnome. Dunno if you'd like it or not but Its certainly evolving much much faster than any other major OS. If it hasn't caught up yet then it will soon and the consumer's choice will boil down to "pay" or "free." The cloud trends that have us doing everything through a browser anyways benefit no OS more than Ubuntu.

I've seen the new UI on a netbook and it looks nice.

Check out the Win8 Metro UI preview below. So sexy.

http://www.engadget.com/2011/09/13/windows-8-for-tablets-hands-on-preview/

[3irty1]

The majority of AAPL is not held by individuals. Investment houses are not fanboys. They're investing to make money. People take their allegiances out of the equation when investing anyway. You're misinformed about this.

Look at what the analysts are predicting. They had 100% growth in the past year for the most part. They'll have huge growth next year. And more the next. This isn't just one analyst. This is pretty much every analyst. Go on yahoo finance. I think they've reported that 50 out of 50 investment groups call it a strong buy. I haven't checked the page in a few days so it may have changed.

Of course not after the decade they've had Apple is a part of a bazillion funds I'm sure. It doesn't take a majority of the holders to be individuals to throw wrenches into estimates or spiral away from its intrinsic value. You are living proof as a fanboy who owns stock. I know two more, one with over a million dollars worth. The effect is there in the form of not just personal biases but also media hype. Who do you think those analysts are for? Human behavior and social movements have a monstrous impact on the market, otherwise we could all just follow the numbers and we'd all get rich.

[retailguy]

man, you leave for a couple of days, and well... I'm almost speechless. When I finish laughing, I'll weigh in.

[retailguy]

The faster that happens the better. However, with my experiences with rate and tax and sur charges, I'm not looking forward to the day that everything is in the cloud and pay-for-service. I think they are going to gouge the hell out of us. And then, much like ATMs, credit cards, and bank fees, they will legislate it so that the ants pay for the locusts.

I worry about that too. Data plans today are absolutely ridiculous. This is why I don't own an iPhone. Don't want to pay big bucks for the wireless when I'm surrounded by wifi all day. I don't understand how these carriers aren't hauling in ridiculous profits.

Having said that, I have to imagine that someone will disrupt this market. In the next few years, someone will introduce shared data across multiple lines that will bring the price down. After that, companies will be able to buy large data blocks. As LTE and the future gens of wireless progress, the cost to provide the data will become cheaper and cheaper. Hopefully that helps.

Well, the TV market is a lot more mature than the smartphone/wireless internet market.

Do we have choice there? Are there a bunch of companies out there offering cheap TV service? No? Why not?

One reason is that the barriers to entry are huge. Not very many folks can launch satellites into space. Cable companies are a regulated market. Cities and towns only allow ONE, in rare instances, TWO. Now there are occasional options for a second provider using telephone lines, but largely there isn't choice because of barriers of entry.

Costs are high, and rising.

Why will the smartphone industry be different? Cities and towns already regulate the number of towers and location of them. Barriers to entry are large, and competition is low to the point of 4 major providers. All "sub tier" providers have to use tower space from the big 4. The big 4 controls the leases, and the terms of those leases.

So, you, or me are just gonna waltz into the big 4 and demand a contract so we can "knock off" the subscriber base with cheap internet? Yeah. That's not likely to happen anytime soon. It'll take a technological shift that probably isn't even in the making, especially since clear wireless teamed up with Sprint. That was probably the best hope.

[retailguy]

You're really in love with PEG ratio.

94% of stocks follow it historically I've read. Rightfully so, it's an incredible indicator.

Incredible indicator?

Well, not from my perpective. It "can" be a good tool, but like anything else it can be abused.

Let's talk about it. My biggest issue with it is that it is a "predictor" of future events and none of those are exceptionally reliable. No one (except Jesus) can predict the future and he ain't into stocks so he doesn't weigh in.

The P/E ratio is a critical component of the calculation of the PEG. The PEG can only begin to be accurate if the P/E is accurate. Plenty of things can make it inaccurate. Some are perfectly honest, some are NOT. Just like the rest of the market (and life too).

So why can the P/E be unreliable? The P/E is determined at a given point by the market value of a company or its shares. Already built into this market price are the future expectations of a companies growth. Future growth affects share price, therefore future growth affects P/E, which affects PEG.

Next, let's look at earnings. Earnings are an accounting figure that can include non cash estimates. Earnings have to be prepared in accordance with GAAP, on the surface you might think they're all identical. But they're not. Companies have much latitude within GAAP to manipulate earnings depending on whether they have an aggressive or conservative approach to their business.

Other companies have massive underfunded pension and healthcare obligations. Guess what? Those are not reflected on their income statements and are therefore left out of the P/E ratio. That could be a major factor in the accuracy of the PEG, couldn't it? Leaving out debt would increase the P/E ratio and make the company look much more attractive than it really is....

Then there are always "one time events". For example, if you own a company that sells one of its subsidiaries for more than it's book value, this would be recorded as an increase in net earnings. This would alter the accuracy and the usability of the P/E ratio, and make PEG useless as a measure of value.

Honestly, I'm just getting started here. I haven't even really talked about a company that wanted to manipulate it's numbers. Guess how Madoff made his scheme attractive? Yep, the P/E ratio. In his case, through all kinds of markets, it stayed the same, or very similar.

I like PEG, it's a good tool. ONE tool. Free cash flow is another, and it's much harder to fake longer term.

Partial, you know enough to be dangerous. If everything falls just right, you'll make money. But if it doesn't, you'll lose your shirt, just like the Enron employees who had their retirement in stock and options.

You ridiculed me earlier for "comparing" corruption with recession. But you missed the bigger picture. To the investor, sometimes corruption can look like recession, or things other than recession. You don't know until it's too late.

I could have substituted the list I gave you to include AIG, Countrywide, GM, Chrysler, Chase, Bank of America. It wouldn't have made any difference the outcome is the SAME.

Thousands upon thousands of investors lost everything in these companies. Don't be stupid enough to be the next one. Blindly following PEG, or any other ratio for that matter, will lead you down a dark alley so fast you won't know what hit you, other than your money is now gone forever.

[retailguy]

more later. Skin I will PM you.