Seeking Alpha

Marc Gerstein  

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  • Apple: The Most Undervalued Equity in Techdom [View article]
    I've already said what I said re: P/S above and elsewhere and see no point in repeating myself. Beyond that, hero worship and homage to past performance are, actually, major sentiment-based factors driving the stock. Given all that's out there, including a ton on Seeking Alpha, I don't find it necessary to catalog everything although here's one example of homage to past performance that just so happens to be in my field of vision right now: "I care that this company is minting money, growing earnings, and making a great deal of money for its long term investors." (Actually, present tense is not terribly useful for this sort of thing; you'd really have to edit it to: "I care that this company has been minting money, growing earnings, and making a great deal of money for its long term investors.")

    Look, you like the stock. I don't. That's life.
    Jun 2, 2011. 09:45 AM | Likes Like |Link to Comment
  • Apple: The Most Undervalued Equity in Techdom [View article]
    That's fine. Personally, I hate situations distorted by hero worship such as we're seeing with AAPL. But if you're into situations like this, what the heck. To each his own. hero worship and past performance satisfies you, then by all means put your money to work in AAPL.

    By the way, I'm not at all scared off by cries of overvaluation. For example, I rode GMCR up for year believing the Street to have drastically underestimated the company's growth potential. I had confidence in my GMCR story and rode it, although many disagreed (although I like to think I made a more sold business case than I'm seeing people make nowadays with AAPL, but that's just my opinion.)

    Remember, too, what I'm carping about here . . . the labeling of Apple as the most undervalued stock in techdom, a claim that is shockingly superficial. If you like Apple based on some other theory, then go for it. But I really hope nobody who owns AAPL is there because of the belief it's a value play.
    Jun 1, 2011. 02:16 PM | Likes Like |Link to Comment
  • Apple's Future Depends on Leaping Hurdles, Not Earnings [View article]
    Wow . . . what a ridiculous idea!

    This is EXACTLY the kind of thinking that caused so many to lose so much money a decade ago. It's all well and good to blame it on Wall Street analysts, but in fact, the main culprit was the idiotic notion that one has to take a pro or con position on a small number of widely-talked-about names.

    Hey folks . . . here's a scoop. There are a ton or stocks out there besides AAPL and the others listed for this absurd contest. If you love iPad, then buy the thing and enjoy using it. But if you want to invest successfully, you may want to consider the words of Peter Lynch, who probably knows a heck of a lot more about stock picking than any of the Apple fans we're hearing from nowadays: "If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train -- and succumbing to social pressure, often buys."

    (It's a shame Seeking Alpha removed the thumbs-down icon. I bet I'd have easily topped the 100 mark with this one!)
    Jun 1, 2011. 01:43 PM | Likes Like |Link to Comment
  • Apple: The Most Undervalued Equity in Techdom [View article]
    "The claim that Apple can not retain its margins is true but irrelevant. Apple does not need to protect its margins. They need merely retain some level of healthy earnings growth. This means they need to grow top line revenue and protect margins well enough that they still net more than the year before. If increasing sales is part of this formula -- as it will surely be -- than your P/S ratio will come down."

    OK. But the fact that the stocks is refusing to move up in the face of the currently high P/S margins suggest that the investment community as a whole is much less confident than you are that this will happen. Who is right? We'll all know a few years down the road. But for now, considering the weight of historical precedent on the one hand, countered by hero worship on the other hand, I'll keep my money away from this one.
    Jun 1, 2011. 01:33 PM | Likes Like |Link to Comment
  • Apple: The Most Undervalued Equity in Techdom [View article]
    "So the question becomes, can Apple either retain its high margins or grow its sales to make up the difference. And the answer becomes, "sure, why not?" With the tablet market expected to grow to 80 million units a year in a few years, why wouldn't Apple be able to maintain their dominance of this sector, especially if they are competing on price (which is the only way their margins would shrink)?"

    OK. Your argument is that they can maintain their margins, but to carry it successfully, to convince the legions of investors who have thus far been unwilling to pay up on earnings to the point where the P/S would rise further, I think you'll need to come up with something more than "sure, why not?," especially given basic principles of economics and business history which demonstrates that early-stage first-mover margins tend to shrink.

    I don't own Apple stock nor do I care that deeply how people feel about it. Hence I don't have to demonstrate any point. I'm not the one who posted an article touting Apple as the most undervalued equity in techdom. The burden of proof falls entirely upon those who claim Apple deserves to be more richly valued than is the case now.
    May 31, 2011. 05:55 PM | Likes Like |Link to Comment
  • Apple's Future Depends on Leaping Hurdles, Not Earnings [View article]
    It's a shame this article carries a May 30th publication date. It would seem more suitable for something dated February 14th.
    May 31, 2011. 04:08 PM | Likes Like |Link to Comment
  • Apple: The Most Undervalued Equity in Techdom [View article]
    Yes, AAPL looks quite cheap in terms of P/E, PEG, P/CF, etc. If this were the 1950s and info was not widely disseminated, I might suggest that many in the market simply don't know how cheap AAPL is. But this is the 2010s, when even the novice investors know quite a lot. So presumably, just about everybody know all about AAPL's P/Es etc, as well as their cash generation and their superstar investor-relations team, that continues to get analysts to buy into their obviously persistent low-ball guidance. So given that the market knows all this yet persistently refuses to bid the price of AAPL up higher, something must be on people's minds.

    Perhaps it's the stock's Price/Sales ratios, which are very high relative to hardware producers and specialty retailers (the iTunes end of the business). Perhaps notwithstanding the low P/Es etc., the Street is reluctant to bid the stock further up and thus drive Price/Sales to further heights. That would make sense if the Street believes the current level of earnings is unsustainably high relative to sales; i.e. that the company won't be able to indefinitely maintain its margins.

    That would be a reasonable supposition. AAPL was a big-time first mover and is enjoying its typically big-time first-mover margins, ROEs, etc. But history has shown again and again that such first-mover levels of profitability are not permanent. Prices and margins have trended far down for every electronic gizmo anyone can think of and it looks like the market (those who use real money) is not willing to bet that AAPL will be the first company in the history of commerce to retain near-monopoly status with near-monopoly margins forever.

    Anyone who wants to argue AAPL is undervalued would need to refute these ideas.
    May 31, 2011. 03:56 PM | Likes Like |Link to Comment
  • 7 Reasons Apple's iPad Will Remain King of the Tablets [View article]
    "Apple has only sold less than 15 million of these in the US so far. That means you can go a long time without seeing one in the wild."

    Actually, that's an important point, but perhaps not the one Apple fans really want to hear. We've been bombarded with ton of hype about how incredibly successful iPad is, including the ongoing series of Seeking Alpha articles pronouncing Apple's dominance as being unassailable. If, in fact, we're still in a position were I or anyone "can go a long time without seeing one in the wild," then perhaps it is still way too early to pronounce the category or anyone in it, including Apple, a winner. The only truly reasonable answer may still be to just keep watching.

    "Eventually, due to some nanotechnology breakthroughs, they will be nearly as thin as a piece of paper and so flexible you can fold one up and put it in your pocket......"

    If/when that happens, count me in. But that and all that follows in the rest of the comment has nothing at all to do with the iPad or any of the tablets we're discussing now and has nothing to do with Apple. For all we know, the company that dominates that future market may not have even been founded yet, and it's eventual CEO may still be just trying to get through high school (or, possibly, toilet training).
    Mar 4, 2011. 09:40 AM | Likes Like |Link to Comment
  • 7 Reasons Apple's iPad Will Remain King of the Tablets [View article]
    That's a pretty good point. I keep hearing about all these millions of iPads out there, but where, exactly, are they? I spend a lot of time in places where on-the-go "computing" is intense among a young-skewing crowd, and continue to see lots and lots of laptops but almost no iPads (perhaps once every few months and most recently, a guy with an external iPad keyboard attachment and both screen and keyboard set at neck-achingly dismal angles). I flat-out told my kid "no way" given the prices and considering that they are not computer alternatives but must be used in conjunction with computers. The iPad rhetoric is, indeed, impressive, but so far, I'm still not seeing the reality.
    Mar 3, 2011. 04:09 PM | 1 Like Like |Link to Comment
  • Is the iPad Cannibalizing PC Sales? [View article]
    "1) iPads and netbooks are content consumers."

    That's not necessarily true. For around $400, I have a Lenovo Netbook with 2G memory on which I installed all the software I use including office, enabling me to be 100% functional for my business, which was the case recently for about a month when I stayed away from my office due to construction/renovation. So it's wrong to characterize the netbook as a mere content consumption device.

    "2) Price points between iPads and high-end netbooks are similar"

    Again, this is not true. My full-use business netbook cost a heck of about $100 less than the cheapest iPad, has a hard-drive comparable to the highest-cost iPad, and involves no extra internet payments since I can use any available WiFi or the unlimited Verizon tethering I had since before before I got the netbook.
    Jan 20, 2011. 11:20 AM | Likes Like |Link to Comment
  • Apple: More Revenue in One Quarter Than Google Earns in a Year [View article]
    Cool. If you can do a couple of leg splits and back flips while reading this article aloud, you'd have a shot for at least a silver, and possibly gold, medal at cheer-leading competition. If you enter, let us know so we can watch on ESPN.

    Seriously, though, where is the Seeking Alpha disclaimer? Do you own AAPL shares?
    Oct 18, 2010. 05:36 PM | 2 Likes Like |Link to Comment
  • Apple's iPhone Antenna Issue: Overblown, Hubris or Simple Testing Mistake? [View article]
    Microsoft can have a public relations problem involving a product usability glitch. HP can have a public relations problem involving a product usability glitch. Sony can have a public relations problem involving a product usability glitch. Etc., etc. etc.

    Apple CANNOT have a product usability glitch. It's not a PR issue. It's a brand issue. Simplicity, functionality, elegance, a joy to use, etc.... that's why Apple launches become big news, why people wait in huge lines to buy new product, why Apple has so manty dedicated fans, etc.

    It takes time for an image to change, and for the moment, emotional inertia is working to Apple's benefit; hence the reason why it can still sell iPhone4s. Ditto iPad (check Apple's letter to users re: iPad wireless problems and its recommendations to upgrade router firmware and re-set security protocols . . . not sure why the media missed this, but it;s in the support area). Do fans wait on huge line to buy Apple product so they can run home and upgrade router firmware and re-do security protocols?

    The recent glitches aren't just glitches. They stand right at the core of the Apple brand.

    This is a dangerous time for Apple. If the company winds up going into a pattern of deterioration, business writers 15-20 years hence will probably analyze 2010 as the point where it all began. If Apple is to continue to flourish, it needs to understand this, embrace this, and make darn sure further new products go out the door in perfect working order come hell or high water.
    Jul 14, 2010. 12:37 PM | 11 Likes Like |Link to Comment
  • Why Apple Stock Makes Me Nervous [View article]
    "You hold zero AAPL which qualifies you as a looser."

    Wow! That is an absurd and frightening (for you whether you realize it or not) statement.

    No matter how great anyone might think Apple is, or how great it might actually be, nobody can ever be called a loser for failing to own a particular issue. There are thousands of other stocks to choose form many of which are just as great as what even bulls expect of Apple. The only thing relevant is the performance of your portfolio. There are no brownies points based on which stocks contribute to your returns.
    Jun 3, 2010. 11:33 AM | 3 Likes Like |Link to Comment
  • Why Apple Stock Makes Me Nervous [View article]
    Typo alert?

    "But as an investor, the current valuation of Apple shares ($260.83 at market close on June 1, with a peak on April 26 of $272.46) makes me nervous."

    Surely you meant to comment on the stock's PE, rather than just the price level. Right? (wink, wink)
    Jun 2, 2010. 02:06 PM | 8 Likes Like |Link to Comment
  • Why the iPad Will Flop [View article]
    I don’t even remember or care about the point of the original article. Reading the comments is so darn much fun . . . and perhaps a treasure trove of techie sociological data, with the pc vs apple feuds.

    I’m a pc guy and wouldn’t consider iPad as a computer; it can’t do most of what I need my laptop to do and the price point is such I cannot consider laptop plus iPad.

    But there is another angle emerging here, as mentioned by some other comments: e-reader.

    I started with Barnes & Noble for Blackberry and love it and considered Nook. Then Amazon release Kindle for Blackberrey. I actually like the B&N app better, but I’m into classics and Amazon does a much, much, much better packaging these for e-readers (the Google book B&N relies on are dreadful). But the fact that Kindle is a closed system scares me a bit.

    What to do, what to do . . . re: full-size reader.

    How about iPad (16GB 3G is way more than I need)! It’s more expensive than Nook or Kindle, but cheaper than buying both, yet iPad also has the Apple reader and internet thrown in for the heck of it.

    I’m not sure I’m going to do it. I’m fine now e-reading on Blackberry (it sounds like a terrible user experience, but try it - it’s much better than it seems like it should be). I would like to wait for some price cutting, which history says we should expect. But for as much of a pc-laptop-netbook guy as I am, iPad has settled into my radar and I may eventually wind up owning one.
    May 8, 2010. 12:31 PM | 3 Likes Like |Link to Comment
More on AAPL by Marc Gerstein