Lance Finke

Lance Finke
Contributor since: 2012
Company: Intrinsic Research
@richbar - looks like you have fewer and fewer investment options if you are ignoring share buybacks. More specifically, 254 companies within the SP500 have bought back at least 1% of their shares over the past year. This list includes approx. 50 names that have bought back a higher % than AAPL's 5.8%. So by your logic half the broad market 'only' has buybacks going for it.
'Apple fans don't like to talk about market share and prefer to talk about profit share, whatever that is.'
@author - be careful, implying to investors that profit share doesn't matter doesn't sound like the best investment advise. Profits tend to keep companies in business and the brands you describe 'gaining market share' will be out the smartphone business before the market saturates. Smartphones, like every other commodity product will eventually be produced by a handful of companies. I feel fairly certain Apple 'with it's modest profits' will be producing smartphones long after the also-rans disappear from existance in the marketplace.
Don't worry Mike - I don't expect my comment or anyone elses' to ever influence your stance on Apple. I realize you are trying to keep your cost per comment ratio as low as possible. And writing anything positve on Aapl would certaintly reduce your profit share on SA (whatever that is)
@GEC - I vote to replace your comment with Blair's article and call it a day.
@Richbar - I've given you credit in the past for accurately predicting a slowdown in Net Inc to around $40/sh annually. But once again, why is it so hard to fathom new products/categories that also leverage the iOS ecosystem? Additional earnings drivers will come unless you fully believe Apple is mailing the next 5 years in and calling it a career. History tends to repeat itself and Apple has proven this time and time again.
@glenway - with all do respect, the reason Apple's slide in share price occurred solely from the anticipated and subsequent decline in growth on both the top and bottom line. Once over-weighted institutional hedge funds and large investment management firms speculated growth would stall they reduced their sizeable portfolio weights in AAPLstock.which at the time was 67%. By the time Q1 2013 results were released institutional ownership decreased 3% points (or $17.2 billion in market capitalization) and the stock had dropped 14.9%.
To further to put additional downward pressure on the stock - THEY WERE RIGHT as AAPL reported their first quarterly decline in EPS at -.4% on Jan 23 for the Christmas qtr 2013 (first quarterly negative eps decline in over 10 years!). Stock immediately dropped another 12.9% after that report and experienced additional declines as subsequent quarters only produced moderate top line growth of 11.2%, .9%, and 4.2%. While EPS growth was even further depressed with -18.0%, -19.8% and -4.7% YTY declines.
The only thing that will propel shares higher going forward is a reversal in both top and bottom line growth. Fortunately, Apple has popular product refreshes, a significant buyback program in place, subsidies being put in place in new markets (Japan and India - with hopefully more to come), new products categories coming, the China Mobile boost in product sales, and an increasing growing software/services/acce... business line growing at roughly 25%. Incidentally, to put software/service revenue in perspective the revenue generated from this segment is greater than 75% of the companies in the SP500 on a TTM basis. At some point this service revenue becomes an even more material growth driver in overall Apple revenue growth.
Really Michael? incensed? You throw these wild opinionated articles on SA several times a week. They have twisted views of what is really happening in marketplace (with your significantly flawed and pretty charts) and you provide absolutely zero fundamental analysis. You appear to make you investment decisions out of 'hope' and 'spite' (because BBBY got their lunch eaten).
I've read every article and every post to your writing - clearly some commenters have crossed the line but far more individuals have accurately challenged your 'opinions'. (you know the joke, everyone has one? right?) Your rebuttals to quality comments cease to exist but you sure do like to fire back at the ones that make it personal.
Have some class, do some more homework (valuations, financial strength, management effectiveness, EV, etc. ) and please do look for better short opportunities - I promise you their of plenty of good ones out there - and Apple definitely is not one of them.
@MdMike - love the Jim Rome 'jungle' reference. Consider it done.
@Tom - the following information ties in well with your article....... #of apps and #of downloads don't tell the whole story.
'According to DSP Adfonic, iOS accounted for over 60% of all ad impressions worldwide on mobile devices during the third quarter of this year. Surprisingly, even though it has a much larger worldwide marketshare of mobile platforms, Android only accounted for around 30% of ad impressions.'
I could take the comments from this string namely from @zip, @glenway, @flux, and @chase and make and make a better article then any article written by this author and Michael Blair combined.
Nearly every industry is eventually commoditized but there is always left with one or two dominant players who reap the majority of the profits. Anyone who thinks Apple will not be the primary benefactor in the smartphone, tablet, wearable device, and probably the living room is blinded by the obvious. The main indicators Apple shareholders need to watch are iPhone unit sales (Q/Q% and Y/Y%) and iPad usage data - until these data points start declining I will not worry about about my position.
Meanwhile, going forward Apple can make leaps into any future category by being vertically and horizontally integrated better than any other company on earth. The market clearly wants a new product category and is expressing their impatience. But as an investor I feel Apple's earnings multiple does not reflect the potential for a new product category so I will be patient, hold common shares, and continue buying long-dated calls to capture silly gains once Apple forces the markets hand.
@Chuck - Hope your arm heals from patting yourself on the back continuously.
You should have put 'I am long AMZN in the title'
@Brian,
Completely agree - using a LT Growth Rate forecast where only 9 analysts are willing to go on a limb to project future earnings potential is useless. There is a reason the other 40 (approx.) don't even provide this LT Growth Rate.
@Brian,
Labeling Thomson Reuters as a gold standard in anything is overly generous. Their are many conventions used to determine the 'mean' estimate and which estimates are included or excluded. While 2013-2016 fiscal year forecasts may average -5% I can look at the same estimate database and see very impressive forecasted earnings and revenue momentum. For instance;
YTY Quarterly Revenue/Share for next 4 quarters forecasted to grow at 5%, 4.4%, 5.4%, and 11.6%
YTY Quarterly EPS for next 4 quarters forecasted to grow at -8.6%, .2%, 6.9%, and 20.7% respectively.
Using interim vs annual estimates certainly provides a different forward looking story.
Author - you are clearly clueless ' apparently great financials' There is no other company on earth with the financial strength of Aapl.
Your writing is worthless and should be ignored by all SA readers
'I would argue that android is way more customizable, way more empowering and that people who have a taste never move back to IOS'
You can argue all you want. However, this statement is absolutely false. Dozens of surveys have concluded far more android users switch to iOS devices vs. android stealing users from the Apple ecosystem. Clearly you like your charts so why don't you attempt to find one that supports your ridiculous argument.
@Richbar - you do deserve credit, this was something you recognized probably before anyone on SA. Many people critisized your logic including myself - so I thought I would at least recognize your very accurate prediction that earnings and revenue growth would ultimately become flat. I do still have some hope new product categories to offset reduced profit in both iphone and ipad categories -but as you mention growth will remain difficult. The 20% LTG forecast was never valid as only a handful of analysts (currently 5) even are willing to project growth this far out.
@Carolina,
Appreciate the correction, I did mis-interpret R&D with CapEx. Nonetheless, the relationship of CapEx to Sales is also an important measure to Apple management's effectiveness in improving operational efficiencies. And this ratio certainly speaks to Apple's desire to continue to plow money back into the manufacturing supply chain.
@author:
Your quote - 'One disturbing trend from Apple is that its research and development (R&D) expenditures are decreasing as a percentage of its revenue.' Couldn't be further from the truth.
Date: Capital Expenditures / Sales:
12/31/2012 5.6
9/30/2012 5.3
6/30/2012 4.4
3/31/2012 3.7
12/31/2011 3.4
9/30/2011 3.9
6/30/2011 3.4
3/31/2011 3.7
12/31/2010 3.7
9/30/2010 3.1
6/30/2010 3.1
3/31/2010 2.9
SOURCE: Intrinsic Research Systems
Apple's capital expenditures as a % of sales have doubled over the past three years. Had to quit reading your article after that statement. There is enough garbage to sift through on aapl without SA authors blindly throwing out financial data and assumptions that are simply 'incorrect'.
@Anthony - agree with Judoka, very well written piece and couldn't agree more. Likewise - thank you for your service.
@richbar - I'll reply to you since you never return the favor. Apple's market implied growth rate is currently a little over 1%. So, your growth prospect for the coming year actually increasing the fair value of Apple stock. The only way Apple doesn't earn $50/share in fiscal year 2013 is if they close all their stores! Fiscal Q2 (holiday quarter) could see $16/share and 20% growth yr/yr very easily. Have you visited a Apple store, Verizon, AT&T lately - they speak pretty highly of record sales this holiday quarter?
So that would leave $32/sh for the remaining 3 quarters in their fiscal year - good luck with that. I simply have not seen any reputable source validate a lack in demand or a decrease in market share. With continued demand across 3 different product lines, full product refreshes, and the potential for a new product in the marketplace (it has been 3 years since the iPad introduction) all Apple naysayers and critics are in denial thinking Apple is just quit trying to make more money.
You keep quoting 20% future growth for Apple - agreed, this does come from analysts. But only 9 analysts actually even waste their time providing a 5-yr growth rate forecasts because they all know its like guessing when the first man will vacation to Mars. 50 analysts provide Q1 estimates. 10% growth still leaves a PEG of 1.
A higher percentage of new users enter the ecosystem than leave the ecosystem - fact. Like my household after the second device (iPhone and iPad) next comes PC replacement (which justifies Mac as the only growing PC seller). Within 2 years Apple will have 2 billion active iTunes users with credit cards on file - an easy monitization opportunity. With 85% of web traffic on mobile devices the potential for iAd's to explode if also realistic.
Quite simply, you can keep calling for the demise of Apple with negative growth expectations but in reality there are no facts to support negative growth in the next 12-24 months. But what does exist is the potential to disrupt many more potential markets - Do yourself a favor and ''Don't bet against them' or the stock.
@jack baker - very insightful comment as usual. I enjoy reading your perspective and insights. Best of luck with your investments.
Interesting perspective Chris, thanks.
@css... almost forgot, a huge dividend bump - probably will instantly jump it's yield to 3%, wouldn't want to get that either?
@css..... do you think Apple's future earnings are more suspect than say ...MSFT? just saying because I'm paying less right now for Apple future earnings than MSFT future earnings.
Not everyone has a iPad either (although most will soon).... not everyone is happy with their current television viewing either..... errr China mobile.....what happens when 500m apple existing iTunes accounts continue to grow at 15% for 3 more years (that's 1 billion shopping customers) buying content, apps, shows, etc every year..... Mac growth showing no signs of slowing...... doesn't look like the build quality and lasting excellence of Apple products across any of their lines has a serious competitive threat (and please don't give me the 'android argument' across 20 different manufacturers)...doesn't look like they like building retail stores fast enough either - because I've been in 9 apple stores across the country over the past 6 mos. and there wasn't much walking around room.....
I can't wait for news sources to stop comparing iPhone to Android. It's literally iPhone against every other smartphone maker and then claiming the entire smartphone industry is just killing Apple. Whatever, give me a break.
Every Apple critic needs to quit trying to be the hero on predicting apple's downfall and appreciate what is occurring right under their noses.
Do me a favor... and tell me what other companies deserve a greater premium for potential future earnings?
Luke, you do understand this is not a NOK article?
@Luke, guess I don't understand from an investment perspective why NOK and RIMM and MSFT (presumed shareholders) spend so much time and effort making negative comments on Apple articles. I would think adding value to NOK articles would be the wiser use of my time. Very comfortably long AAPL - and I don't need to spend hours on NOK articles bashing their last 5 years of bad business practices.
@luke,
From evidence I've seen, China Unicom and China Telecom subscribership is increasing significantly at the expense of China Mobile. The leverage is actually in Apple's favor, because they are doing just fine without China Mobile.
Look at the China sales growth figures and then tell us how again how bad apple needs China Mobile. Any deal with them is just a huge bonus for Apple, but clearly not necessary.
As soon as I saw 'Reggie Middleton' I immediately closed the tab. Thanks for the link - not really.
@bill - as usual, very level-headed, logical, and factual article. Thanks again for your efforts and look forward to your earnings preview article.
@ashraf - just because they make $40billion a year (think tax revenue) doesn't mean they need to spend the $121billion (think federal reserve) in the bank on their shareholders (think entitlements). Our country/government has been doing that forever. Great plan. You may have plenty of technical expertise - but I don't see much else.
The citi analyst is now actually 3 (analysts covering aapl), doesn't mean they are any less clueless though.
The first accurate 'supplier check' will probably be the last.
@bargin bin....your comment;
'This is, of course, outrageous compared to the average analyst estimate of about 20% annual earnings growth over the next 5 years.'
The # of analysts providing quarterly (q1) and annual (fy1) eps consensus forecasts are 45 and 54 analysts respectively. Meanwhile, only 9 sell-side analysts even bother to provide a 5-yr growth forecast (20.67%) - so roughly 80% of the analysts know this is worthless to even guess.
Hand's down the most worthless growth rate to present, IMO.