Apple to Announce Q1 2011 Financial Results on January 18th

[TallManNY]

We definitely have very different view on investing! Each his own, I am looking for amazing intrinsic value that when the stock gets over priced or stops growing I get out and reinvest in something else while the market corrects the overpriced stock and then buy it back. I do not look for dividends; it is a plus but not necessary for my strategy. I strive for 25% compounded rates on my portfolio and have been riding the AAPL wave for all it is worth!

You have to admit that eventually the company is supposed to pay its owners (i.e., the shareholders) some money. The point of a company isn't just to pay its employees a nice wage and give them something to do during the day, it is supposed to make money for the shareholders.

Apple has been doing great and I think it might do better in the future. But if it is making $10 or $20 Billion a year in profit at what point does it start to do something with the money? Yes, Apple has made only small acquisitions. I love it. But one of the following things MUST happen in the future: (i) Apple starts paying dividends or stock buybacks, (ii) Apple starts making large acquisitions of other companies, (iii) Apple starts making huge personal investments (think huge server farms throughout the world or some incredible bold new product), or (iv) Apple missteps, its products become unfashionable and it starts loosing money and it keeps itself running by using the huge cash reserves. The fifth option, Apple just keeps raking in money and sticking it in the bank can't continue forever.

I hope people are that Apple doesn't do something stupid like buy Facebook. Microsoft is a good counter example. Word and Windows gives Microsoft huge cash flow every year. Microsoft basically continues to squander that money on things like the Zune, the Kin or things that never see the light of day (Surface?). I bet if you go back 20 years, Microsoft's shareholders would have liked to have gotten bigger dividends and not seen all their money (and that is what it is, it is the shareholder's money) get spent on terrible products outside of Microsoft's monopoly industry.

 

[apple1990]

I saw something on WSJ the other day about guys speculating whether this stock hits $1000. That would be ridiculous, but at this point saying "it won't happen" seems like foot in mouth.

I think they worked out that Apple would need net income of around $52B to justify $1000 (17 P/E ratio). Interestingly it would give them a market cap of close to 1000B and if they did reach that, they would be the first company to do so. Confirming Steve Jobs position alongside the greatest CEOs in history (if not the greatest). Whatever happens his comeback will be talked about for hundreds of years to come. What a story.
The revenue would need to be around $236B to achieve that net income, unless they improved their margins (which are in fact growing).

I think $1000 will be very difficult but $400 will come this year, probably by may. I think we'll be close to $500 by the end of 2011. It will be interesting to see where we are in 2012. Its gonna be one hell of a ride.

 

[apple1990]

The next milestone is going to be when Apple overtake Exxon Mobil as not only the biggest company in the US but the world. They need to get to around $430 for this to happen. (Woops, just checked. Exxon have gone on another run!)

Fantastic, a film must be coming soon. Apple will be the business school case study for the next 20 years.

 

[Aatos.1]

It will be interesting to see iPhone sales numbers given all the recent articles about Android

As much a I prefer the superior "phone performance" of my AT&T Android vs the dismal phone of my iP4, I'm thrilled everytime I check the performance of my Apple stock. Acquired years ago at a mere $24 per share, today it easily pays for all my annual Apple purchases

 

[Aatos.1]

Confirming Steve Jobs position alongside the greatest CEOs in history (if not the greatest). Whatever happens his comeback will be talked about for hundreds of years to come. What a story.

As a longtime Apple shareholder & customer, I've followed them closely. Steve Jobs greatest achievement has been growing into the worlds greatest pitchman. Nothing beats a great sales person.

 

[henrystar]

Careful what you wish for. Just remember the last time they were paying dividends: late eighties, early nineties: great years for Steve Jobs, NeXT, and Pixar; not so good for Apple.

Anyway, if you get a dividend, you have to pay the full income tax on it. Sell a share or two for the same money, and the same hit on the value of your holding, it's only a capital gain. I hope they never pay dividends again.

Boo-Hoo! ALL my AAPL shares are in my IRA, and so I will have to pay full income tax on ALL of it when I finally sell. Mind you, I bought 2/3 of it at $4.

 

[Jade velly]

How did you get so many words in your question? They cut me off at 400 I think.
Bush has known for years that this big crash was immenent.
He's been praying that it would hold off till he left office. It's not the Dems, it's the guy in charge, who won't admit that God didn't tell him what to do about this.How did you get so many words in your question? They cut me off at 400 I think.

 

[KPOM]

What I don't get: so long as Apple (or any company with a similar policy) does not issue dividends, what is the point of owning the stock? It's like gold insofar as there is no practical purpose in owning it (other than a tiny percentage used for industry/art) save the perception persuading someone else to pay even more for it. What is ownership of Apple stock but a few expensive bits in a server somewhere?

(This question is presented with honest respect: Apple is doing awesome; I'm just wondering what owning stock therein means beyond laying claim to something you can never have and will never produce for you.)

The point of a company is to earn profits for its shareholders, and thus you are correct that eventually every successful company will need to distribute its profits, usually in the form of dividends. Another way of doing so is to buy back shares.

That said, companies in growth mode usually don't pay dividends under the argument that the money is needed to fund future growth. Companies usually start to pay dividends when it becomes clear that their markets are maturing and they won't experience the rapid growth they have in the past. That is a legitimate question given how rapidly Apple has grown over the past decade. By paying dividends, a company is essentially telling its shareholders that they are likely to be better off having the cash returned to them rather than letting the company manage it. By not paying dividends, a company is essentially telling its shareholders that management believes it can generate a higher return for them.

The tax law also comes into play here. Apple had over $50 billion in cash and short term investments as of last quarter. Since dividends are taxable to shareholders upon receipt (and often at higher rates than the tax rates applied to capital gains), the tax code generally prohibits companies from hoarding cash. The argument here is that maintaining a cash hoard is simply an attempt to delay or avoid the imposition of tax on those dividends. Microsoft was in a very similar position about 10 years ago, and started paying dividends at that time. As long as the company can argue it has a legitimate need for that cash, it can usually avoid distributing it. An acquisition is one such legitimate need, hence the speculation that Apple is in the market for another company.

It appears that analysts have gotten wise to Apple's historically conservative guidance, and are out there with very aggressive revenue and profit targets. Last quarter Apple exceeded its own guidance, and met the consensus revenue and profit targets, but its stock price fell after the announcement since gross margin was slightly below target. The stock price has also gone up quite a bit since the start of the year, much of it leading up to the Verizon announcement that was leaked heavily in the preceding days. If Apple has a blowout quarter the stock might jump up again, but if it just "meets expectations" it may well take another hit like it did last quarter. That turned out to be a good buying opportunity, though.

(full disclosure - I have a long position in Apple shares).

 

[apple1990]

If you are clever as well you can make a quick profit by selling before the earnings as they usually go down after they are released. Of course this is risky as the earnings could be fantastic (again) but they would have to surpass all expectations as if they don't then the stock market (wrongly) will be disappointed.

The volatility of AAPL certainly presents a lot of opportunities.

 

[KPOM]

If you are clever as well you can make a quick profit by selling before the earnings as they usually go down after they are released. Of course this is risky as the earnings could be fantastic (again) but they would have to surpass all expectations as if they don't then the stock market (wrongly) will be disappointed.

The volatility of AAPL certainly presents a lot of opportunities.

The shares spiked upward after the July press release. They spiked downward in October. We'll see what happens Tuesday in the after hours trading.

 

[apple1990]

Damn, wish I'd sold my shares on friday like I was going to.

Hope stevie gets well soon.

 

[Swaggar]

Let me guess. Apple will kick some behinds. Kazillions of iPhone 4 sold.

Apple always show others that they are the best..And I agree with you that Kazillions of I-Phone 4 sold...