Apple's Market Capitalization Hits $600 Billion

[Bosunsfate]

Its not if the stock will grow. The question is at what rate it will grow.

Now its certainly getting into bubble territory, time to pull my stock out I would think.

Not even close to bubble territory. Apple is by far, one of the safest stocks you can buy today. A key reason it is still growing.

The question on nearly every financial analysts mind is not whether Apple will keep on growing. The question is how long will it keep growing at this rate.

The best statement I heard this morning from an analyst, was.

If you are happy with a 10% return then buy Apple. But if you want more than a 10% return then Apple is likely not where you should be looking.

The point of that is, the stock is a buy, but it all just depends on the time horizon and growth rate you are looking for.

And personally, the stock will hit $1000/share and the company will be the first hit $1trillion valuation. The question is just a matter of when will that happen.

 

[dukebound85]

Just because a company has a high valuation makes it a bubble? Please. Check the P/E ratios of the bubble stocks in the DotCom crash. Check the P/E ratio of Microsoft back when it hit its peak of a $600-billion-plus valuation.

If anything Apple is still undervalued. $100 billion in cash and a P/E of a low-growth company despite serious growth.

If P/E was the only factor, stocks would be an easy game to play

 

[Jibbajabba]

This train is unstoppable!

Until it hits a broken bridge, a wall or a closed tunne

 

[Rogifan]

Stock price was up about 1% earlier this morning now down almost 1% because some analyst on CNBC said Apple's return prospects are "dramatically reduced". I figured the minute Apple's market cap hit $600B the stock would drop. The article below from Seeking Alpha is on the money:

http://us.rd.yahoo.com/finance/exte...stop-comparing-apples-to-oranges?source=yahoo

 

[Navdakilla]

Makin that moolaaa

 

[IJ Reilly]

If P/E was the only factor, stocks would be an easy game to play

QFT. I can see the amateur pundits are out in force today. Every one of them seems to be able to predict the future. I wish I knew their secret. (Hint: they don't have one. They are WAGers.)

The truth about valuations: The concept of overvalued and undervalued stocks is a phantom. The markets value stocks every second of every trading day. This is their sole function. Market valuations are based on all of the currently known information about a stock. No stock is worth more or less than that, by definition. As for predicting future values, they are all about being better at guessing the future than the rest of market. Good luck with that.

I've been riding the AAPL critter for 15 years now, through lots of ups, a bunch of sideways, and plenty of downs. All of that experience has taught me one important lesson: never try to predict the future unless you really enjoy looking like a fool.

 

[GFLPraxis]

Stock price was up about 1% earlier this morning now down almost 1% because some analyst on CNBC said Apple's return prospects are "dramatically reduced". I figured the minute Apple's market cap hit $600B the stock would drop. The article below from Seeking Alpha is on the money:

http://us.rd.yahoo.com/finance/exte...stop-comparing-apples-to-oranges?source=yahoo

Eh, I don't think it was the reports that did it. 640 was a resistance point, and it dropped down to the same support point it did yesterday before rebounding to a healthy middle.

It wasn't ready to break 640 yet, and when it hit 640 lots of people saw it as a healthy selling point. Then it dropped until it hit yesterday's low, when a lot of people (me included) saw it as a "woah, too far, it's worth more than that" point and started buying extra, bringing it back to a healthy medium. The stock market moves like that.

 

[sha4000]

QFT. I can see the amateur pundits are out in force today. Every one of them seems to be able to predict the future. I wish I knew their secret. (Hint: they don't have one. They are WAGers.)

The truth about valuations: The concept of overvalued and undervalued stocks is a phantom. The markets value stocks every second of every trading day. This is their sole function. Market valuations are based on all of the currently known information about a stock. No stock is worth more or less than that, by definition. As for predicting future values, they are all about being better at guessing the future than the rest of market. Good luck with that.

I've been riding the AAPL critter for 15 years now, through lots of ups, a bunch of sideways, and plenty of downs. All of that experience has taught me one important lesson: never try to predict the future unless you really enjoy looking like a fool.

Now this is a really intelligent post I can appreciate.

 

[TC03]

QFT. I can see the amateur pundits are out in force today. Every one of them seems to be able to predict the future. I wish I knew their secret. (Hint: they don't have one. They are WAGers.)

The truth about valuations: The concept of overvalued and undervalued stocks is a phantom. The markets value stocks every second of every trading day. This is their sole function. Market valuations are based on all of the currently known information about a stock. No stock is worth more or less than that, by definition. As for predicting future values, they are all about being better at guessing the future than the rest of market. Good luck with that.

I've been riding the AAPL critter for 15 years now, through lots of ups, a bunch of sideways, and plenty of downs. All of that experience has taught me one important lesson: never try to predict the future unless you really enjoy looking like a fool.

Of course you can't simply predict the future, just like you can't predict whether it's a bubble or not based solely on the fact that it just keeps growing and therefore it must a bubble.

If I may speak for myself, I see no reason why Apple's current stock growth is a bubble. Now add the fact that Apple is a company that is performing extremely well plus the fact that numerous analysts and experts have reached concensus that Apple is a 'buy' and I think you can safely assume (not predict) that the Apple stock wil keep rising for another while.

 

[Avatar74]

The truth about valuations: The concept of overvalued and undervalued stocks is a phantom. The markets value stocks every second of every trading day. This is their sole function. Market valuations are based on all of the currently known information about a stock. No stock is worth more or less than that, by definition.

As Buffett so astutely pointed out, though, that is a presumption based on a fallacy: Not all possible information about a company is known to all traders on the market at all times. And this has been demonstrated repeatedly by Buffett, Munger, Jean-Marie Eviellard, Walter Schloss, Stan Perlmeter and other value investors who zig when others zag.

Apple's 12 month valuation by Piper Jaffray is, to put it bluntly, ludicrous. They're currently overpriced by $100 to $200 per share (depending on whether or not you count their $100 billion in investments, cash and equivalents; I don't, for good reason).

In order to justify a trillion dollar price target (and mind you I don't do predictions), they'd have to sell an iPad and an iPhone to roughly every man, woman and child in China in the next twelve months.

Let me put it another way: Apple did about $37 billion in operating cash flow last year. Let's be exceptionally generous and say they'll do double that this year... not based on any math but for sake of argument. Is it sensible to pay $1 trillion for $80 billion?

 

[mjtomlin]

Just because a company has a high valuation makes it a bubble? Please. Check the P/E ratios of the bubble stocks in the DotCom crash. Check the P/E ratio of Microsoft back when it hit its peak of a $600-billion-plus valuation.

If anything Apple is still undervalued. $100 billion in cash and a P/E of a low-growth company despite serious growth.

Microsoft's P/E ration was over 70 when it went over $600B market cap.

 

[qaq]

Let me put it another way: Apple did about $37 billion in operating cash flow last year. Let's be exceptionally generous and say they'll do double that this year... not based on any math but for sake of argument. Is it sensible to pay $1 trillion for $80 billion?

Dude you need to alert Berkshire Hathaway pronto

Coca-Cola (KO) is their largest position is it worth holding something with m. cap of 163.32 billion for 8 billion

any chance KO can grow at 40% a year ?

Save Warren help him understand the danger

 

[Avatar74]

Dude you need to alert Berkshire Hathaway pronto

Coca-Cola (KO) is their largest position is it worth holding something with m. cap of 163.32 billion for 8 billion

any chance KO can grow at 40% a year ?

Save Warren help him understand the danger

Tell me: What was Coca Cola's price to book ratio in 1988 when he started buying shares? *

What's Apple's P/B today?



* By the way... In 1988, Coca Cola was hovering around $5 per share and had a dividend payout ratio of 10% (now 40%). But using discounted cash flow analysis they were at the time worth 12 times that. Apple isn't presently worth its market price using the same valuation.

 

[hkenneth]

Perhaps Apple will someday make everything you need in YOUR life.

It's a troubled life that can be totally fulfilled by Apple products.

I need things in my life that Apple can't make...

I am pretty sure that Japanese tech companies would bring us robot girlfriends sooner than Apple would do.

----------

QFT. I can see the amateur pundits are out in force today. Every one of them seems to be able to predict the future. I wish I knew their secret. (Hint: they don't have one. They are WAGers.)

The truth about valuations: The concept of overvalued and undervalued stocks is a phantom. The markets value stocks every second of every trading day. This is their sole function. Market valuations are based on all of the currently known information about a stock. No stock is worth more or less than that, by definition. As for predicting future values, they are all about being better at guessing the future than the rest of market. Good luck with that.

I've been riding the AAPL critter for 15 years now, through lots of ups, a bunch of sideways, and plenty of downs. All of that experience has taught me one important lesson: never try to predict the future unless you really enjoy looking like a fool.

It is just a game of philosophy. Very much like the Frequentists consider parameter a fix number while Bayesians consider it a random variable. Both are correct... What matters is you would need different analysis tools with respect to the philosophy you choose.

----------

As Buffett so astutely pointed out, though, that is a presumption based on a fallacy: Not all possible information about a company is known to all traders on the market at all times. And this has been demonstrated repeatedly by Buffett, Munger, Jean-Marie Eviellard, Walter Schloss, Stan Perlmeter and other value investors who zig when others zag.

Apple's 12 month valuation by Piper Jaffray is, to put it bluntly, ludicrous. They're currently overpriced by $100 to $200 per share (depending on whether or not you count their $100 billion in investments, cash and equivalents; I don't, for good reason).

In order to justify a trillion dollar price target (and mind you I don't do predictions), they'd have to sell an iPad and an iPhone to roughly every man, woman and child in China in the next twelve months.

Let me put it another way: Apple did about $37 billion in operating cash flow last year. Let's be exceptionally generous and say they'll do double that this year... not based on any math but for sake of argument. Is it sensible to pay $1 trillion for $80 billion?

Have you really been in China?

 

[Avatar74]

Have you really been in China?

I'm from the other country with a billion-plus population

But seriously, one doesn't have to go to China to know how to do some basic mathematics... Operating cash flow has to grow to a certain point to make Apple's DCF valuation $1000 per share. Work backward from there, and you get an idea of what they'd have to sell at minimum above their current operating cash flow to get there.

 

[IJ Reilly]

Of course you can't simply predict the future, just like you can't predict whether it's a bubble or not based solely on the fact that it just keeps growing and therefore it must a bubble.

If I may speak for myself, I see no reason why Apple's current stock growth is a bubble. Now add the fact that Apple is a company that is performing extremely well plus the fact that numerous analysts and experts have reached concensus that Apple is a 'buy' and I think you can safely assume (not predict) that the Apple stock wil keep rising for another while.

In a sense, the future is already predicted, by scores of analysts who pour over Apple's balance sheet, investigate their product pipeline, extract data from suppliers, poll retailers, stay on top of rumors, and evaluate the company's future earnings growth. Whether you believe them or not, this is essentially how they arrive at their one-year pricing forecasts. They also abstract the data to make recommendations to their clients, such as buy, sell or hold (or the many variations thereof).

The problem with making assumptions from or drawing safe conclusions about any of this is that you are working from the same data as everyone else, not more, and very possibly less. The markets absorb new information about a company almost instantly. Both optimism and pessimism get baked right into the pie. The result is the current price for the stock.

As Buffett so astutely pointed out, though, that is a presumption based on a fallacy: Not all possible information about a company is known to all traders on the market at all times. And this has been demonstrated repeatedly by Buffett, Munger, Jean-Marie Eviellard, Walter Schloss, Stan Perlmeter and other value investors who zig when others zag.

Apple's 12 month valuation by Piper Jaffray is, to put it bluntly, ludicrous. They're currently overpriced by $100 to $200 per share (depending on whether or not you count their $100 billion in investments, cash and equivalents; I don't, for good reason).

In order to justify a trillion dollar price target (and mind you I don't do predictions), they'd have to sell an iPad and an iPhone to roughly every man, woman and child in China in the next twelve months.

Let me put it another way: Apple did about $37 billion in operating cash flow last year. Let's be exceptionally generous and say they'll do double that this year... not based on any math but for sake of argument. Is it sensible to pay $1 trillion for $80 billion?

We've already debated these points extensively, so you know where I disagree. I will say, simply, that others have argued with equal conviction and based on convincing data that the ideal stock trading mousetrap has not been invented. You still have to take on greater risk to obtain higher returns.

I'm not on board the trillion dollar AAPL choo-choo train, but not because I think it's impossible or plainly ludicrous, but simply because I don't want to be a foolish predictor.

 

[qaq]

Tell me: What was Coca Cola's price to book ratio in 1988 when he started buying shares? *

What's Apple's P/B today?



* By the way... In 1988, Coca Cola was hovering around $5 per share and had a dividend payout ratio of 10% (now 40%). But using discounted cash flow analysis they were at the time worth 12 times that. Apple isn't presently worth its market price using the same valuation.

Was I arguing that KO was a bad investment in 1988? But by you logic BRK are making a big mistake by holding it now given that unlike APPL KO caries some sizable debt and has very limited grows opportunities.

 

[terraphantm]

You were able to get a loan a year ago for the sake of investment? Which bank did you use?

Probably an unsecured loan. I personally wouldn't take out a loan for an investment in stocks unless I was really sure it was going to make enough money to pay the interest and then some.

 

[Shrink]

I am pretty sure that Japanese tech companies would bring us robot girlfriends sooner than Apple would do.

LOL

I had something a tiny bit more related to emotions in mind.

But on a purely physical level, considering my current situation even a robot would be a step up!!

 

[Monkey194545]

Apple market value is now worth 20 times Dell market value.

Market value of common equity only.

 

[Rogifan]

I just saw a report from an "analyst" who claims the mobile phone/computer industry is in deep doo do and claims the "entire cellphone and computing ecosystem will be shaken to the ground" by....Windows 8. Wonder how much Microsoft paid him to write that drivel. LOL

 

[Avatar74]

Was I arguing that KO was a bad investment in 1988? But by you logic BRK are making a big mistake by holding it now given that unlike APPL KO caries some sizable debt and has very limited grows opportunities.

No, that's not really what I was driving at. My primary concern, as is Buffett's, is with acquisition price relative to value and dividend payments. Most of the stocks in my portfolio are likewise pretty underrated by analysts at the time: For a variety of reasons I won't go into (unless you want a very long, very dry discussion of market makers, prop trading and the Volcker rule's impact on it...)

In Berkshire's case, the acquisition price was very, very shrewd. So they paid five bucks for (what was at the time) sixty bucks of value (and now much more than that), and as long as the dividend payout is earning them just over $400 million a year on autopilot, there's no reason to sell.

Selling is a whole other matter in which I don't bother with making target predictions. Berkshire has a few other impacting factors there, as well, because they either have substantial voting power or, in more recent acquisitions, they own the entire company outright. In either case, while they're holding they can steer the future of those companies with the benefits that ownership gives them: Not the least of which is the election or disposition of directors on the board.

For me, a sale would occur only if I think something substantially went south about the underlying operations: soundness of management, competitive moat, operating cash flow... and/or dividend payout (when applicable). As well as the overall issue of whether or not it's likely that the asset I bought at not just a discount, but a steep discount (I don't like cutting it close; in Apple's case it's not close, it's upside down), will continue to be worth several times what I paid for it.

For the last four years, Coca Cola has cranked out operating cash flow steadily.... Nobody with $163 billion and a desire to start a soda company is likely to change that in the foreseeable future, given Coke's brand and moat (see what I did there? for AAPL fanboys this question wrongly comes BEFORE the value question, rather than after...)

Lastly, I wouldn't say Coke's growth opportunities are limited. This is the company that coined the phrase "share of stomach" once they reached a point of saturation in soft drinks. Here's a (very, very large) list of all the brands owned by Coca-Cola. I'll let you decide who is vastly more diversified between KO and AAPL: http://en.wikipedia.org/wiki/List_of_Coca-Cola_brands

----------

I just saw a report from an "analyst" who claims the mobile phone/computer industry is in deep doo do and claims the "entire cellphone and computing ecosystem will be shaken to the ground" by....Windows 8. Wonder how much Microsoft paid him to write that drivel. LOL

Probably not much less than what Apple paid Gene Munster to write up a trillion dollar valuation...

 

[LagunaSol]

If P/E was the only factor, stocks would be an easy game to play

But P/E can be a pretty good indicator of a valuation bubble. See: DotCom Bust.

 

[Avatar74]

But P/E can be a pretty good indicator of a valuation bubble. See: DotCom Bust.

True, though P/B is a better indicator of the same.

 

[Avatar74]

We've already debated these points extensively, so you know where I disagree. I will say, simply, that others have argued with equal conviction and based on convincing data that the ideal stock trading mousetrap has not been invented. You still have to take on greater risk to obtain higher returns.

In the short run, not in the long run. What these analysts, who have been for decades poo pooing Graham and his Superinvestor pupils (who have beaten the S&P year in and year out; while the Street *still* thinks these now billionaires are going about it all wrong), consistently fail to mention is that any number times zero is still zero.

A dollar of lost principal today is a compounded loss tomorrow. Every gambler who seeks high returns wipes out some principal. That principal is (1+r)^nt lost future value... as opposed to future compounded returns.

I don't know why anyone thinks it's more sensible to play for the short term... but I suspect it has to do with a) impatience and b) poor math skills.