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ValueThis4

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  • Why iPhone 6 Won't Reverse Apple's Market Share Decline [View article]
    It's always fun to read comments from people who own Apple but clearly haven't thought through any of their rationale for owning it (disclosure no position in AAPL). I'm not even going to comment on your claim about no one considering Android phones better than iPhones, because honestly no one in the real world cares except the people who post on these message boards....as for iPhone saturation and your claim about growth in South America being huge.....do you even look at income statements? How fast is Apple growing currently? Answer: 5%. Wow. What an amazing company. I totally want to own a company growing in the single digits, and who has half of their revenue coming from the iPhone which is being commoditized as we speak. I definitely don't see any risk at all in that scenario.

    But wait, bigger screens will make everyone switch to Apple!1!!1! Right. Because I forgot everyone has the ability to predict what smartphone people are going to want 2 years from now. The leaders of the cellphone market 7 years ago (Blackberry and Nokia) never experienced an enormous loss of customers to a competitor in a short amount of time, and everyone saw it coming in time to dump their stock and avoid losses. I'll say it here: Apple's stock price will NEVER double from this point forward....think through the implications of that....what's your maximum return? 30% plus a dividend over the course of a few years, and while taking on a pretty substantial amount of risk? Yea....I can't believe I don't own Apple, what a fantastic steal!
    Jun 21 06:11 PM | 1 Like Like |Link to Comment
  • Apple Stays Rotten [View article]
    Wow, you'd think you insulted someone's mother or something..
    Good article David. I'm not sure I completely agree with the way your model works, but I understand the reasoning behind ROIC and your basic premise. Put more simply, Apple's margins are headed down to a more "normal" level as competition catches up and product differentiation becomes increasingly difficult. It's basic economics. I'm only 22 and even I realize this simple fact. It's happened time and time again with electronics (PC's, "dumb" phones, Printers etc...) and yet people invested in AAPL keep wanting to think this time is different. Wonder how that mentality has worked out in the past?

    The worst part is, even if this time is different, what return are AAPL "investors" really expecting to get at this price? 30-50%? 100%? You can get that return in a lot of other stocks. Hell, you could've gotten 100% with HPQ earlier this year. BUT NO WAIT AAPL IS GONNA BE A $2 TRILLION DOLLAR COMPANY!!!111! Yea. Because that makes a lot of sense. The risk involved in AAPL right now isn't horrific, but there's nothing special about the company on the reward side. There was a time to buy AAPL. It was 5 years ago. You missed it. Now get over it.
    Sep 23 11:51 AM | 2 Likes Like |Link to Comment
  • Apple's Buyback Program: Value Destroying And Value Retaining [View article]
    Interesting take, but I think everyone here (and anyone passionately involved with Apple) keeps missing something, which is: Every Apple bull (including Icahn) acts like assuming no earnings growth is some extremely conservative assumption. With companies like KO, CHD, MCD that have extremely predictable operations and have consistently grown earnings for decades past, it usually is and can be seen as a good way to derive a conservative value. With Apple, however, this is not the case. In the consumer technology industry, earnings can (and have) taken a huge nosedive within a relatively short period of time (think BBRY, NOK). People might rant about how Apple has some unbeatable ecosystem or hidden advantage that locks people into their products and keeps margins high (people said the same thing about BBRY, NOK), but the cracks are already beginning to show and a "no growth" scenario may turn out to be relatively optimistic. Case in point: In June 2012 AAPL made $35B in revenue. This June '13 quarter they brought in.....just over $35B in revenue. Meanwhile, earnings went from $8.8B to $6.9B. See what's happening? Profit margins fell from 25.2% to 19.5% (-5.7%). The writings on the wall and everyone keeps looking away.

    Let's say they somehow manage to repurchase every share you talk about in this article (174M) THIS year. Shares outstanding go from 908M to 734M. Now, let's assume Annual Revenue goes from about $170B (from the last 4 quarters) to $195B (a 15% increase which to me is generous considering revenues basically stagnated from June '12 to June '13). If profit margins drop only 3% from their current ttm 22%, you're looking at earnings of $37.15B on 734M shares for an EPS of 50.6. Throw in a 12.5x multiple (where it's trading at now) and you get 632/share. From it's current price that's an awe-inspiring gain of...wait for it.... 26%. If margins fall further than 3% and revenue stays flat, all of which is relatively likely, you're looking at a stock that will probably be assigned an even lower multiple on lower earnings.

    To sum it all up, you're essentially betting that an enormous $450B company, in an extremely competitive industry (consumer electronics), with stagnating sales and falling margins will be able to somehow reignite sales growth AND keep convincing people to pay for a product that's looking more and more like the competition's every day. All for a paltry 30% gain. I might be more understanding if it was 75% or 100%, but you can earn a quick 30% on literally THOUSANDS of other stocks out there, and probably with less risk. Are people really still expecting a double out of Apple? Does a $900B phone company sound realistic? Exxon provides a good everyone will need AND pay for for years and years to come....its market cap is <$400B. You can get a relatively good idea of what demand for oil will look like in 10 years. No one has any idea what Apple's numbers will be or even what the industry landscape will look like. That's really all there is to it.
    Aug 22 05:33 PM | 1 Like Like |Link to Comment
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