Trying To Come Up With Something Negative About AAPL

Posted: June 16, 2014 in Android, Apple, Apple TV, Business, Farros, iOS, Royal, Technology and Business
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At the risk of becoming, “All Apple All The Time”… I will share with you the approach Daniel Sparks over at The Motley Fool just took evaluating AAPL:

As I attempted to make the doom-and-gloom case for Apple stock at $91.28, I kept running into walls.

So he threw it out to readers to chime in… here’s what I had to say:

 

I love the approach of this article, thank you.

I’m most worried about upcoming earnings.  Even though recent inventory checks seem bullish for the quarter, common sense tells me that people really may be waiting for the iPhone 6 (I am)… that’s gotta hurt on some level.

On a macro level, I’m worried about a war breaking out… or oil spiking to $140… or some such… which, of course, would spook the entire market.

I also worry that AAPL could shoot itself in the foot and make a dud product… Newton, anyone?  Specifically Apple could underpower the iPhone 6 relative to Android devices… they seem to do that… and at some point that will catch up with them.  I also think Apple made a user interface mistake taking away the “button” controls in iOS7… used to be easy to know what to tap… now it’s a bit more guesswork… the point is that Apple isn’t infallible and we may see things get more complex, not less… which could hurt adoption.

Finally, I worry about contrarian things… everybody really is jumping on the bandwagon… you know it’s bad when even an author has to resort to a bear challenge!

 

With all of that said, I can easily see — actually do see — the counters to all of these.

Fewer iPhone 5’s sold could just as easily mean even more iPhone 6’s will be sold.  In that contrarian way, a net positive.

When war breaks out, that reduces uncertainty… and generally speaking people look for a “flight to quality.”  Another net positive.  (Though, if oil misbehaves, that’s an entirely different story… that’s one to watch for the entire market.)

And Apple has already shown people a lot of iOS 8… and we know from the history of Apple laptops, Apple will figure out that smokin’ fast hardware will count in mobile, too.

More to the point:  AAPL has been in the penalty box for so long that the stock really has been depressed for years… if you normalize the terrific gains over the last year with the disappointing performance over the last few years, the chart kind of suggests Apple ends up where it should be… with the trajectory still aiming high and to the right.  Given I’m a big believer in the pendulum swinging too far in any direction, I don’t think we’re at “enough” yet… because even a mediocre iPhone 6 upgrade cycle will be staggering… and if you throw on an iWatch (personal health/info development platform), iTV (entertainment development platform), and maybe a massively-connected payment system and such…

… it’s just hard to see — given that Apple is one of the top brands and cash machines in the entire world — AAPL *crawling* into simple p/e parity with the rest of S&P as being crazy.

Just p/e parity alone represents about a 24% increase in stock price… or up to just under $115 a share.  For a company that arguably is the most relevant in its growing space, does $115 feel so far from where we are?  Not really.

Imagine what AAPL can be worth if actually gets a multiple it deserves… ?

Arg, I’m not sure I was very helpful to the bear case, sorry!

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