AAPL - Apple Inc.

[Guest rimm_never_sleeps]

the apple bears have zero conviction.  as for me I would not buy it here. I would not short it here. As for apple being lumped in with all the other consumer device makers, subject to the same margin pressures of a commodity builder?...would you lump in Porsche, BMW, and Mercedes with Chevrolet and and Hyundai? No you wouldn't. they are fundamentally different companies with different selling models. Would you lump Omega in with Timex? no you would not. there are various price and value categories of almost any consumer product. The point is you better know exactly where apple fits in that structure before you buy it or sell it.

[berkshiremystery]

I know that I will be lambasted for this since most of the board loves Apple and their products. 

 

I really want to short this stock.  Think they are real close to their peak in terms of consumer penetration.

 

Actually, I feel like most people on this board do not like Apple.

 

I own 2 Apple products (iPhone & iPad), and enjoy them. It's only that I try to separate my thoughts

the bipolar type of way,... i.e.  consumer/investor.  Asking myself, can I predict the future net margins without using too much brain power.

 

[gokou3]

The point is you better know exactly where apple fits in that structure before you buy it or sell it.

 

Good point.  I think many people assume that Apple will continue to increase market share, and that's wrong.  The majority can't own BMW (or Omega), otherwise BMW would lose its luster and exclusiveness.

 

iPhone's market share in the smartphone category (for purchases and to a milder degree, existing ownership) has been declining as Android is gaining share.  Now that Win8 is coming, iphone's share may decline more.  Same trend will happen for ipad.  Now, it will still sell greater quantities of iphone/ipad, because the pie is getting better quickly.  However, there will be a point of saturation, probably in 5-10 years.

 

 

[gokou3]

Just for fun, here are two pics... one is an ad made by Samsung comparing its flagship S3 to the iphone 5.  In response, an Apple enthusiast made a similar pic touting the iPhone 5.  Tell me which company you think is more innovative.

 

http://www-bgr-com.vimg.net/wp-content/uploads/2012/09/samsung-iphone-5-ad.jpg

http://cdn.iphoneincanada.ca/wp-content/uploads/2012/09/iphone-version.jpg

 

And in the meantime... Samsung S4 will arrive early next year.  The competition is only getting more intense.

http://www.iclarified.com/entry/index.php?enid=24475

 

[DCG]

Just for fun, here are two pics... one is an ad made by Samsung comparing its flagship S3 to the iphone 5.  In response, an Apple enthusiast made a similar pic touting the iPhone 5.  Tell me which company you think is more innovative.

 

http://www-bgr-com.vimg.net/wp-content/uploads/2012/09/samsung-iphone-5-ad.jpg

http://cdn.iphoneincanada.ca/wp-content/uploads/2012/09/iphone-version.jpg

 

Not getting your point here. An awful Samsung ad modified by some random person is an example of Samsung being innovative? Samsung's entire mobile business model over the last several years has been to take Android, and modify it to create iPhone clones (and now they're paying Apple for stealing from them). Real innovative.

[bmichaud]

Re the discussion of Apple as an investment over the next two years...

 

Apple is in no way a Buffett inevitable company because nobody with a straight face can predict what its earning power will look like in ten years. That being said - I think it deserves a place in the "surfing" category Charlie Munger has discussed before, where investors "surf" a particular technology for an imtermediate amount of time. Very interesting concept that I think fits Apple quite well.

[rmitz]

DCf, you kind of missed the point. 

 

Apples stock price is based on 40% margins, today, and huge growth rates.  When these falter, the stock will get slaughtered.  Its that simple and in all of investing history it has never failed to happen. 

 

Part 2: Buying Apple now to get a 20% return over two years, with huge downside risk makes no sense.  Therefore holding Apple stock at these levels makes no sense either.

 

I generally dont buy growth companies inless they are dirt cheap: BAC, JPM, AIG, FFH. 

 

Now I will sit and wait and ignore the Apple thread.

 

Hm, I don't think today's stock price at all prices in 40% margins and huge growth rates.  Back out the cash, and it looks like the market is already pricing in a good amount of margin compression/lower growth.  Now there are a number of problems with AAPL as an investment at this time, but I don't think those are accurate.

[rmitz]

Can Apple sustain 25-30% net margins for the next 50 years, and beyond forever ?!?!?!

Buffett knows Coca Cola margins will be forever the same, actually 'til the last judgement day.

 

1) maybe, maybe not.

2) I don't think KO is that sure a thing anymore either.  Judgement day?  That's clearly hyperbole. 

[watsa_is_a_randian_hero]

DCf, you kind of missed the point. 

 

Apples stock price is based on 40% margins, today, and huge growth rates.  When these falter, the stock will get slaughtered.  Its that simple and in all of investing history it has never failed to happen. 

 

Part 2: Buying Apple now to get a 20% return over two years, with huge downside risk makes no sense.  Therefore holding Apple stock at these levels makes no sense either.

 

I generally dont buy growth companies inless they are dirt cheap: BAC, JPM, AIG, FFH. 

 

Now I will sit and wait and ignore the Apple thread.

 

Hm, I don't think today's stock price at all prices in 40% margins and huge growth rates.  Back out the cash, and it looks like the market is already pricing in a good amount of margin compression/lower growth.  Now there are a number of problems with AAPL as an investment at this time, but I don't think those are accurate.

 

+1

 

also, uccmal, i don't think any of the 4 companies you listed could be classified as "growth".  Banks/insurers are inherently not growth companies as they are return on capital companies. 

[LC]

Can Apple sustain 25-30% net margins for the next 50 years, and beyond forever ?!?!?!

Buffett knows Coca Cola margins will be forever the same, actually 'til the last judgement day.

 

1) maybe, maybe not.

2) I don't think KO is that sure a thing anymore either.  Judgement day?  That's clearly hyperbole.

 

Can you expand on your thoughts about KO?

[Ross812]

Apple is not expensive; the balance sheet backs the valuation. I just think at some point the valuation of the entire business is absurd. At todays valuation, let alone a market cap of 800 billion in two years, Apple is worth more than all the TBTF banks combined, the combined market cap of the airlines and railroads, or all the auto makers and Boeing.

 

800 billion for a company that essentially innovates the original iPod (a toy) every five years and incrementally adds to their innovation in the interim is absurd. I cannot bring myself to invest in Apple (though I like their products) because there is no way to project their earnings into the future. I don't see a clear moat other than their size. I'm positive an entrepreneur could build another Apple for 600 billion; furthermore, if everyones iDevice stopped working tomorrow, the world would continue to run without much of a hiccup.

 

Apple might continue at it's present trajectory and be worth 800 billion in a couple years. I don't trust the market to have enough sense to value this toy maker at a reasonable level in the next two years, and there is no way I would short it. I would guarantee Berkshire Hathaway with or without Buffett will be worth more than Apple in 2030, 2050, or 2100 so I will just buy BRK instead and let those who want to chase Apple chase it.

[mpauls]

you guys should seriously consider shorting AAPL.

[gokou3]

Just for fun, here are two pics... one is an ad made by Samsung comparing its flagship S3 to the iphone 5.  In response, an Apple enthusiast made a similar pic touting the iPhone 5.  Tell me which company you think is more innovative.

 

http://www-bgr-com.vimg.net/wp-content/uploads/2012/09/samsung-iphone-5-ad.jpg

http://cdn.iphoneincanada.ca/wp-content/uploads/2012/09/iphone-version.jpg

 

Not getting your point here. An awful Samsung ad modified by some random person is an example of Samsung being innovative? Samsung's entire mobile business model over the last several years has been to take Android, and modify it to create iPhone clones (and now they're paying Apple for stealing from them). Real innovative.

 

My point is, by comparing the "extra" features in each phone, I would say that the extra features of S3 are more desirable than those of i5.  Btw, some of the extra i5 features are available in S3 already (icloud --> 25GB dropbox; panaroma --> just an camera app!; Free OS update --> check; 700k apps --> Android probably has similar #; iMessage  --> Whatsapp is cross-platform; facetime --> Skype)

 

It's true that Samsung has lost a lawsuit and many of its features are "inspired" by the iPhone.  However, I think an inflection point has occured in which Samsung (and other manufacturers) are outcompeting Apple.

 

Again, I am not advocating a short and AAPL may as well go up in the short-term; but I won't go long now.

[racemize]

I'm largely ambivalent re the Apple discussion (probably more on the long side).  However, I think it is a mistake to judge products by comparing spec lists.  The overall experience is what counts--including the ecosystem, ease of synching/purchasing, actual experience of the product (e.g., UI/responsiveness of the phone), etc.  For example, Apple makes custom hardware that is designed for the software--the processor speed of two products doesn't show the effects of customizations.  I also hear a lot regarding the bugginess of the customizations you can do with Android. 

 

Similar to the above, I spend more an Apple laptops, and it isn't based on specs.

 

Also, how long did Apple dominate the iPod area--did their margins come down significantly with those?  Arguably those were much easier to clone than a phone right? 

 

 

 

[DCG]

My point is, by comparing the "extra" features in each phone, I would say that the extra features of S3 are more desirable than those of i5.  Btw, some of the extra i5 features are available in S3 already (icloud --> 25GB dropbox; panaroma --> just an camera app!; Free OS update --> check; 700k apps --> Android probably has similar #; iMessage  --> Whatsapp is cross-platform; facetime --> Skype)

 

A long list of tech specs with fancy names is not why most people buy certain phones. Samsung and other manufacturers sell features. Apple sells the user experience. Marketing 101. I know that sounds like a 'fanboy' view, but that's a bit reason Apple has been so successful.

[DCG]

Apple is not expensive; the balance sheet backs the valuation. I just think at some point the valuation of the entire business is absurd. At todays valuation, let alone a market cap of 800 billion in two years, Apple is worth more than all the TBTF banks combined, the combined market cap of the airlines and railroads, or all the auto makers and Boeing.

 

800 billion for a company that essentially innovates the original iPod (a toy) every five years and incrementally adds to their innovation in the interim is absurd. I cannot bring myself to invest in Apple (though I like their products) because there is no way to project their earnings into the future. I don't see a clear moat other than their size. I'm positive an entrepreneur could build another Apple for 600 billion; furthermore, if everyones iDevice stopped working tomorrow, the world would continue to run without much of a hiccup.

 

Apple might continue at it's present trajectory and be worth 800 billion in a couple years. I don't trust the market to have enough sense to value this toy maker at a reasonable level in the next two years, and there is no way I would short it. I would guarantee Berkshire Hathaway with or without Buffett will be worth more than Apple in 2030, 2050, or 2100 so I will just buy BRK instead and let those who want to chase Apple chase it.

 

Fair Enough (although all the airlines that are losing money every year are a tough comparison).

[gokou3]

My point is, by comparing the "extra" features in each phone, I would say that the extra features of S3 are more desirable than those of i5.  Btw, some of the extra i5 features are available in S3 already (icloud --> 25GB dropbox; panaroma --> just an camera app!; Free OS update --> check; 700k apps --> Android probably has similar #; iMessage  --> Whatsapp is cross-platform; facetime --> Skype)

 

A long list of tech specs with fancy names is not why most people buy certain phones. Samsung and other manufacturers sell features. Apple sells the user experience. Marketing 101. I know that sounds like a 'fanboy' view, but that's a bit reason Apple has been so successful.

 

Ya, fancy names like "Retina Display", "Facetime", "Airplay".  I agree that Apple has been a genius at marketing.  But marketing has to be substantiated.  I feel that Apple's "substance" is trailing further and further behind its "marketing".  They don't call it reality distortion field for nothing.

 

Just to give on example, the 4S was marketed as being xx% faster than the 4.  I owned both phones, but don't notice much difference.  Speed is a pretty critical component of user experience to me.  Now, iPhone 5 is again being marketed as being 2x as fast as 4S.  I will have to see whether the user can realize such speed improvement during real world use.

 

Btw, other manufacturers are catching up quickly on the user experience.  Most people who have used Win7 phones (mostly Nokia Lumia) speak highly of them.  The promise of an integrated ecosystem of deskop, tablet, phone, and xbox in win8 must be quite appealing to a certain segment of the market.

[DCG]

Btw, other manufacturers are catching up quickly on the user experience.

 

To an extent. The Android ecosystem is still a disaster.

 

I'm curious to see how well Windows 8 does. It has a long way to go to catch up in terms of apps though (which is the issue with Windows 7 mobile).

[berkshiremystery]

 

Can Apple Defy Gravity Forever?

Sep. 17th, 2012

http://beta.fool.com/rsaintvilus/2012/09/17/can-apple-defy-gravity-forever/12089/

 

Sir Isaac Newton reminded the world that "for every action, there is an equal or opposite reaction." According to history, Newton’s theory was said to have been inspired by a fallen apple.

[gokou3]

Btw, other manufacturers are catching up quickly on the user experience.

 

To an extent. The Android ecosystem is still a disaster.

 

I'm curious to see how well Windows 8 does. It has a long way to go to catch up in terms of apps though (which is the issue with Windows 7 mobile).

 

Yes, the android mess is what has kept me from switching to it so far, although I think for the typical user it shouldn't be too bad.  I really want to see Win8 successful (ya so i am biased), so that I can manage all my gadgets within the windows system.

 

Windows phone has over 100k apps. The gap is also closing quickly.  If I were a developer, would I want to develop a new app that may fill a need in a new growing ecosystem, or just another app to differentiat myself in a jungle of 800k apps?  "Developer arbitrage" would really help closing the gap.

 

 

 

 

[Guest valueInv]

Ironic,the Apple bears in this thread seem to buy Apple products themselves and think that other people will stop buying them.

 

BTW, the evidence seems to be pointing towards a GM decline ;)

http://www.intomobile.com/2012/09/17/iphone-5-flop-apple-doomed-oh-wait-its-most-successful-iphone-yet/

[Parsad]

Ironic,the Apple bears in this thread seem to buy Apple products themselves and think that other people will stop buying them.

 

BTW, the evidence seems to be pointing towards a GM decline ;)

http://www.intomobile.com/2012/09/17/iphone-5-flop-apple-doomed-oh-wait-its-most-successful-iphone-yet/

 

Remarkable...and they'll dominate for some time!  But remember this?

 

http://finance.yahoo.com/echarts?s=IBM+Interactive#symbol=ibm;range=19701106,19930215;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 

How about this?

 

http://finance.yahoo.com/echarts?s=msft#symbol=msft;range=19950217,20030901;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 

Lastly?

 

http://finance.yahoo.com/echarts?s=aapl#symbol=aapl;range=19840907,19971230;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 

"Those Who Forget The Past, Are Doomed To Repeat It"

 

Cheers!

[racemize]

Come on Parsad, that MSFT one was a bit cheap--the P/E was crazy high at its peak!

[VAL9000]

 

Here's an interesting article covering the rapidly declining cost of hardware.  Apple and Amazon are both mentioned:

http://venturebeat.com/2012/09/15/hardware-is-dead/

 

[gokou3]

Come on Parsad, that MSFT one was a bit cheap--the P/E was crazy high at its peak!

But I would say MSFT is more of an annuity business than AAPL - at least until recently.  Namely, people bought desktops every 3 or so years and upgrade from Win3.1 --> 95 --> 2000 --> XP, etc.  Can't say the same would go on for as long period for AAPL.  For myself, I did buy iphone 4 and 4S, but would likely switch to another brand next time.