thompr

Why Apple Is Worth $80

He's not only underestimating last quarters EPS by about 50%, he's also taking the company's notoriously low guidance to extrapolate an estimate.

Then he uses a multiple that is entirely inappropriate for the growth (which he doesn't notice is occurring) and he also doesn't properly account for cash.

Put it all together, and he is easily a factor of 4 off.


On Oct 26 04:24 PM Graham and Dodd Investor wrote:

> DOUBLE the author's starting earnings estimates for the reasons you
> mention, and use his other assumptions, and I get a price of $108
> instead of $54.
>
> You'd have to say that starting earnings are understated by FOUR
> TIMEs to get to the current stock price.

Why Apple Is Worth $80

There are three reasons that the analysts have underestimated AAPL in previous quarters: (1) Apple successfully "sandbags" their guidance, so analysts don't have a solid basis for their estimates, (2) we are in a recession, so without a solid basis, analysts will naturally underestimate any company that is somewhat defying the recession, and most importantly (3) none of the analysts add in a contribution from deferred earnings that are due to be realize EVEN THOUGH THESE AMOUNT ARE AVAILABLE.

And now, YOU ARE DOING THE SAME THING.

Worse, the rules of accounting are about to change, and soon, Apple won't be spreading these REAL EPS figures (e.g. $3.10 in the previous quarter) over 2 years.

Result: bigger EPS reports coming, and all of your computations are going to get caught with their pants down when it happens.

How could anyone that appears to be so smart and thorough (your article and the different ways you view this) possibly miss something so critical and obvious? I am definitely shaking my head on this one.

Why Apple Is Worth $80

So, the fact that so many people reject this conclusion proves that it must be right?

Well, perhaps. But the other possibility is that the conclusion is truly, and absolutely, downright LUDICROUS.

Just check whether this author puts the REAL EPS from last quarter ($3.10) into any of his analyses. DID = take another look, he may be onto something. DIDN'T = the author is completely unaware of the effects of subscription accounting on the numbers that he is using to compute valuation. If the latter is true, then his numbers are completely bogus.


On Oct 25 06:18 PM superintelligent wrote:

> Just the fact that this article has attracted so many harsh attacks
> proves that the author must be on to something... something that
> hurts those who love AAPL unconditionally. So unconditionally that
> they

Why Apple Is Worth $80

Apple is pulling in about $13 - $14 EPS right now (extrapolated to a year) and the only reason that isn

Hoping for an Apple Media Server

You wrote:

"and iPhoto pretty much bars it entirely: if one person is using a certain library, no one else is allowed access to it. "

This is not the case. All of my user accounts on all of my machines at my house share the same iPhoto library. They can view/modify to their hearts' content, and all others will pick up on the changes.

The only restriction is against simultaneous access... which makes sense from a data integrity perspective.

Randy Thompson

If Apple Does Correct, It Will Do So Soon

Blah blah blah, again, Zach.

You timidly say "if A, then B, so that is my prediction." Later you say, "but C may happen, and if so, then D" in spite of the fact that B and D are mutually exclusive conclusions.

Boil it all down and you are not saying a damn thing. And it's a good thing too, because your charts are worthless at predicting the future. Absolutely worthless. You'll get it right as often as wrong, but your emotions will make your performance worse than 50%.

Give it up, man. Oh, that's right, your blog is supposed to be earning you money with that "Donate" button, that's why you are on here spouting your BS. How's that working out for you?

Thompson

Three Thriving Companies: Wal-Mart, Apple, Apollo Group

You lumped iPhones with iPods just prior to making the statement "there's not much room to grow there". While I would agree that there is scarce room for iPod growth (it already dominates a steady-state market) I profoundly disagree that the same is true of the iPhone. So profoundly, in fact, that I am tempted to ask whether you are crazy.

Thompson

Apple Poised for a Near-Term Pop

Zach,

AAPL is due for a run because the Apple fundamentals are kicking the butts of the pessimism that is baked into the share price. The event that most likely placed the potential positive indicators into your charts was the last earnings release, which was tremendous relative to the fears of Wall Street. The result was a big pop in the share price, which in turn juiced your indicators. Take that pop away, and you are still left with negativity.

For my own self, I identified an extra $80K and piled it into AAPL on earnings day (prior to close) and got the nice pop. Then I pulled out those extra shares and put the money back in where it had been. The charts never saw that one coming, but I used my common sense to bag a nice daily ROI.

So here is a little conclusion for you: it shouldn't take the charts to tell you that AAPL is due for a run. It should just take paying attention and using your common sense.

Charts Schmarts.

Thompson

Apple Analysts Reality Check: Bear Rally Is Over

What people (especially the media) don't understand is that the only thing holding Apple TV back is NOT the feature set (or lack thereof). It is the lack of timely content available at the iTunes store. The movie studios are bound and determined not to let what happened in music to happen in video: have their whole business model instantaneously upended by giving Apple broad and persistent access to the majority of content as soon as it becomes available. Wal Mart's DVD sales would suffer, Blockbuster's DVD rentals would suffer, and NetFlix would only survive if their digital distribution system they have now is ready for the load and (more importantly) at least half as user-friendly as the iTunes interface.

The bottom line is that someday in the distant future, there will be no physical media carrying music, or movies, or any other sort of entertainment for that matter. It will all be digital distribution. That much is a given.

The only question is how slow and painful (for the consumer) the transition will be while the owners of the content slowly morph their business models to match the reality.

Apple could add all kinds of neat hardware features into their Apple TV, but it would just be another commodity device in a crowded field of such. The only discriminator for Apple (and they LOVE to have discriminators) is the delivery ecosystem that is iTunes. Apple TV will remain a hobby, regardless of features, until the studios open up the floodgates on digital entertainment.

Thompson

Apple Analysts Reality Check: Bear Rally Is Over

Zach,

You have no knowledge as an "investor". You demonstrate day-in and day-out that you are completely driven by "charts". The amount of time you spend talking about "support levels" and other T/A terms, and the time you devote to analyzing what has happened AFTER it has already happened reveals you as a charlatan of the highest magnitude. And your constant characterization of the stock market as a team of "Bulls" doing battle with a team of "Bears" is completely ignorant of what is really going on. I hope you don't believe your own tripe.

Using your methods, or by following your advice, a non-emotional investor can expect to be right about 50% of the time. Given that most people are emotional, though, your methods lend themselves well to followers panicking and bailing at exactly the wrong moment. Bully for you that you have been bearish on AAPL for some time now, and so has the market! If you think that your charting saw it coming, then you are in for a world of hurt when the market changes. Because the charts won't show it until it is way too late.

The funny thing is, when I go to the AAPL page on Yahoo! finance and see the titles of the "Seeking Alpha" articles that are linked there, I can instantly discriminate which articles are written by you (as opposed to any other Seeking Alpha contributors) just from the title alone. If you think that that is good because it means that you have established your own style, well, you could be right. Except for this little fact: your own style is completely bogus and without merit.

Thompson

Apple Analysts Reality Check: Bear Rally Is Over

Zach,

You have no knowledge as an "investor". You demonstrate day-in and day-out that you are completely driven by "charts". The amount of time you spend talking about "support levels" and other T/A terms, and the time you devote to analyzing what has happened AFTER it has already happened reveals you as a charlatan of the highest magnitude. And your constant characterization of the stock market as a team of "Bulls" doing battle with a team of "Bears" is completely ignorant of what is really going on. I hope you don't believe your own tripe.

Using your methods, or by following your advice, a non-emotional investor can expect to be right about 50% of the time. Given that most people are emotional, though, your methods lend themselves well to followers panicking and bailing at exactly the wrong moment. Bully for you that you have been bearish on AAPL for some time now, and so has the market! If you think that your charting saw it coming, then you are in for a world of hurt when the market changes. Because the charts won't show it until it is way too late.

The funny thing is, when I go to the AAPL page on Yahoo! finance and see the titles of the "Seeking Alpha" articles that are linked there, I can instantly discriminate which articles are written by you (as opposed to any other Seeking Alpha contributors) just from the title alone. If you think that that is good because it means that you have established your own style, well, you could be right. Except for this little fact: your own style is completely bogus and without merit.

Thompson

Apple Investors: Fasten Your Seatbelts, Put On Helmets

Neutrino,

I'm with you. Zach Bass spends the majority of his time trying to explain what has already happened, and usually what he comes up with is either the simplest explanation he can find or some mumbo-jumbo about chart patterns that foretold the action.

What he needs to be doing is giving up on this short or near term tea-leaf reading and determine the safest place to put his money for the LONG TERM. Then act on the plan and keep an eye on his assumptions. Oh sure, he will tell you that he does that while simultaneously limiting his risk ("capital preservation", he says) by hedging with options... but in the end, he always uses mumbo jumbo to support his assertions. And at the end of the day, 5 years from now, my assertion is that I will be better off staying long AAPL than trying to whip around with the trends in the chart. "Whipsaw", is more like it.

Thompson

The Global Reach of the First Million 3G iPhones

@ some_guy, longapple, & mcmurachu

Mcmurachu is right. And the references are:

* At MacWorld 2007, when Steve Jobs announced the original iPhone, he claimed the goal was 10 million BY THE END OF calendar year 2008, thus giving Apple approximately a year and a half to make that goal.

* At the July 2007 conference call, Tim Cook stated that the goal was 10 million IN CALENDAR YEAR 2008.

I have video of Steve's reference and an audio copy of Tim Cook's.

Let's stop blaming the media and each other in this. Apple themselves haven't had a consistent story. I think that everyone has pretty much moved to adopting the latest reference (Tim Cook's regarding calendar year 2008). Even Apple hasn't tried to set that straight. They have consistently assured the media that the goal will be met when asked. (If there was a problem with interpretation, Apple has had plenty of time to rectify it, but hasn't. Instead, they have reiterated.)

Thompson

UBS Analyst: Survey Shows 3G iPhone Poses Little Threat to BlackBerry

< less than 5% of new buyers said they were replacing their BlackBerrys with iPhones>

Hmmm. This is not a sufficient question to use to support the conclusion that RIM needn't worry. Since both RIM and AAPL are doing battle for control of a market that is in its infancy but is poised for rapid growth (smart phones rather than standard cell phones) both are needing to grab the new customers. Your question only "pokes at" what percentage of people that already have Blackberrys intend to buy iPhones, and even then you have failed to get that number. Since less than 10% of all people even own Blackberrys, it is still in the realm of possibility that RIM has just lost half of its customer base. Your method of data gathering fails to determine the proper denominator, because you have no data for how many Blackberry owners didn't show up in line to be sampled. Do you know what "conditional probabilities" are? Do you know how to relate them using "Bayes Theorem"? If the answer to these questions is "no", you should read up on them prior to drawing conclusions from statistics. You are not properly defining the sample space.

So your conclusion has two problems: (1) it fails to determine the fraction of current Blackberry owners that are jumping ship, because it fails to account for the percent of random people that even own Blackberrys, and (2) even if RIM weren't losing many current customers (I doubt it, but if...) they still could be losing out on new customers. And given the expected growth in this segment, new customers are going to dwarf the current customers in fairly short order.

A much better survey was completed by Change Wave Alliance, which actually poses the question "In the next 90 days, do you intend to purchase XXX brand of cell phone?" They have been capturing such statistics for years, and there has been significant correlation between the survey results and the ultimate market share numbers. If the results of the most recent Change Wave survey are to be taken seriously, RIM should be worried. Very worried, in fact.

Considering the questions asked and sample mechanisms used by your survey versus Change Wave's, it seems to me that their conclusion (that RIM should worry) is much better supported than yours (that RIM should not worry).

Thompson

Monday's Apple, General Market Fundamentals Favor Bears

<I guess if we all had half a brain, and had ambition to become one of the richest people in the world, then we'd simply follow your advice, right? >

Yes.

<Damn Thompr, where have you been all my life? I'm gonna do it the Warren Buffet or John Henry way.>

That's a great idea.

<Then I can just sit back and watch the billions flow in. Thanks man!>

Well, I wouldn't say that you will also have the performance the richest people in the world got, but putting their methods to use is a far cry better than giving any credence to the observations you made in this blog.

Thompson