Turley Muller

Is Apple More Undervalued Than Other Tech Sector Stocks?

Andy's statement about the deferred revenue being recognized in 09 is correct. Zaky says CURRENT deferred revenue. "Current" means less than a year.

The iPhone revenue is recognized over 24 months, yet the portion that will be recognized within the next year is recorded in "Current" and the other portion is recorded in non-current .

On Nov 04 03:44 PM anon99 wrote:

> A couple of points:
>
> First off the deffered revenue is recognized over 24 months, not
> 12 months. So it will be recognized between now till Oct 2010(not
> till 2009 as Andy has posted). Also it isn;t a straightforward calculation
> wherein you can take the 3bil and assign it to 2009 and 2010.

High Beta Stocks: Plenty of Risk, Little Reward

The beta coefficient is not related to correlation. A line can be drawn through any set of data points no matter how unrelated the data points. The beta would just be the slope of the linear regression trend line, which is the "best fit" yet it could be a terrible fit relatively.

The R2- or coefficient of determination - explains the amount of variation of Y shared by X. Thus, if r2= .5 then it's explained as 50% of the the variation of StockABC is attributed to the variation of sp500.

The author mentions that some stocks (health care) have modest betas but are very volatile and have a low correlation to the market. This would suggest that the r2 would be 0 to .2 or so. Stocks like GE - which is very similar to the overall market might have .5-.6 or higher R2.

The Beta, or slope, just explains the relationship of Y to X - magnitude of change. Betas of .5 and 5 can be perfectly correlated with the market (r2=1), so beta doesn't explain the goodness of fit, just how x impacts y- If a stock moved 5 times as much than sp500, for every change, then the r2= 1 and the Beta would be 5.

My point is - (after longwinded diatribe) is that some Betas can be worthless. Absolutely worthless- This largely depends on how much the market's move is responsible for moves in the stock, the r2. Thus, that is an important factor to look at to evaluate Beta reasonableness.

There are many different estimations out there for any given stock.

AMZN-
Yahoo-3.3
Google-2.7
Value Line 1.2
MSN-2.95

Depends on the time frame used for the measurement.

Apple vs Amazon: A Valuation Analysis

Redwood,
I am not questioning Amazon's ability to grow, I think they can grow significantly. The issue is the profit margins. Retailers have low profit margins, and the stock is priced with expected profit margins to be much higher in future years. Amazon has yet to prove it can boost margins above the retail industry range. The few qtrs AMZN posted high margins, its R&D spending was low and tax rate very low too. (not normal operating conditions)

I think Amazon is gong to do very well. Especially in the long-term. Yet getting in at the current stock price will likely result in below average returns. To earn superior returns, an investor needs to buy stocks at prices that reflect expectations that are likely beatable, not stocks with price implied expectations that are likely difficult to meet.

I agree with your comments, but the issue at hand is valuation at current share price. If Amazon shares were much cheaper it would be a no-brainer.

If one bought AMZN a while back, perhaps when it was attractively valued, he/she shouldn't sell now just because it's overvalued. Investor returns are determined by the price paid, thus buying at these levels is not favorable, but holding is because overtime AMZN will do well. The stock has made it's run for the time being, so I expect near-term returns to be below average.

Amazon's New MP3 Store No Threat To Apple's iTunes

Mr. Howe,
Terrific article. I also want to raise the issue of the iTunes store now available on iPhones and iPods. That space is invaluable since much more than just music can be sold through iTunes store. Since people most always carry cell phones, the iTunes store is a touch away. Amazon and Ebay requires navigating through the web and signing in at their site.

Walk into starbucks and buy the music playing from the touch of finger instead of picking up a cd and walking over to the counter. With a e-commerce portal residing on the face of a user's cell phone displaces amazon and the other retailers. Consumers are becoming so accustomed to paying pocket change for songs here and there, that it will become a habit. That opens the door for many other opportunities. Amazon doesn't want to see Apple capture that space from users habitual purchase of music and movies.

And the Music is lucrative as you mentioned. Know a person who racked up couple thousand dollars buying music after getting a new iPod. He stated he didn't even realize how fast it racks up, and he complains he iPod is not even close to full yet. Laughing.

Amazon Now Trading on Technicals - Not Fundamentals

I read your amazon article- terrific commentary and an awesome website. Thanks for sharing. I completely agree with you statement that Amazon has never been a stock you want to short, and when fundamentals become detached from price behavior no telling which way the thing vould go in the near-term.

In my first article I didn't advise closing out long positions rather advised against establishing a position above $70 since the stock price reflected the most optimistic of optimistic expectations. Eventhough I the stock had gotten ahead of itself, I thought it would be a bad short because the momentum might go a little higher. My opinion then and its the same now is that Amazon doesn't offer the upside/downside risk-reward profile that is attractive. I think the shares have probably made there move for a while, and sitting in a position that moves side ways is not preferable when one could invest in something more attractive. And with fundamentals stretched there is greater risk to the downside since there is nothing rational / tangible to provide support. I think a good deal of short-interest has been soaked up so I don't expect a whole lot of significant demand to propel the stock a lot higher. I think many don't want to buy at current valuations, and I don't think the majority of longs want to exit even if they feel the stock is rich. Long-term I think everyone would like to be in Amazon.
There isn't any other internet retailer that even comes close to comparing with AMZN. It is the leader in a whole new paradigm, it's the one to own but the price has to be right. I think some longs don't want to risk taking profits and trying to get back in on pullback just to see the AMZN shares pop 25% higher in a blink of an eye and miss out. Amazon has seen most of its total price gains in just a few days, so there is a risk being out of the stock if one has a long-term outlook. Many funds and ETF's etc own amazon. It's a core holding just because it comprises so much of e-commerce revenue alone. I don't think fund manager's or long-term investor want to try to time this stock.

Amazon Now Trading on Technicals - Not Fundamentals

Thanks, I appreciate the comment. I Try to find meaningful topics- one which I am knowledgeable enough to discuss.

Amazon.com: Why Now Might Be the Time to Short

. A more realistic valuation in my opinion is $45/Share. I definitely believe the stock has gotten ahead of itself, and short covering has definitely helped push the stock higher as 8 million shares of short interest got squeezed out last month. I wouldn’t bet against this price momentum either; I wouldn’t short it unless the technicals completely collapsed. I wouldn’t buy it either unless it dropped into the low 40’s.
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