John Paczkowski of All Things Digital nails it in 'Apple Investors Are Wusses.' He wonders aloud how Apple investors can be so faithless in a company that in the last quarter reported earnings of $1.14 billion on sales of $7.9 billion, all the while growing their cash hoard to nearly $25 billion in cash.
Yeah, I get it. Consumer company with high-end products in a bad economy with a seemingly irreplaceable leader who is ill, and a less than transparent corporate culture.
Heck, I will go a step further and say that for planning purposes, investors should assume that what's gone from "common bug" to "hormone imbalance" which was easily fixed to something more "complex," and a formal medical leave, probably suggests that Steve Jobs isn’t coming back – at least not in a full time capacity.
Run for the hills!
But you know what; I think that something else is at play in the battering of Apple's stock (it’s lost ~60% of its value since peaking out at around $200 late last year).
For lack of a better term, let’s just call it the Yin-Yang of Apple's Reality Distortion Field.
On the one hand, Jobs & Co have taught us to expect magic, and when they deliver (iPod, Mac, iPhone), it's what we expect because there is no company like Apple.
Yet, when they merely execute, we hammer them because we expect magic.
It's almost as if they've lost their premium for wizardry, which is ironic since isn't the whole moral of the re-pricing of our financial markets about a return to quality?
And who looks better than Apple on a long-term basis in terms of differentiated products, diversified revenue sources, depth of product pipeline, quality/depth of management team, operating margins, profits, cashflow, cash reserves and absence of debt?
So go ahead, punish the wizard, but remember: who looks better against the "quality" template?
UPDATE 1: Good summary by Jim Goldman of CNBC in "The Little App Store that Could," on the runaway freight train that is the App Store: "Do the math and you'll see that a total of 500 million apps have now been downloaded, or 200 million over the past six weeks, doubling the download pace of the preceding six weeks. Back on December 5, an ad stated that there were 10,000 apps available. Today, that figure has swelled to 15,000...probably not enough to change the mind of RBC Capital, which essentially slapped a "sell" on Apple shares yesterday with $70 target (down from $125, incidentally) but it should send the message that despite so many serious distractions facing this company, some fundamentals continue to work. And this is the kind of fundamental that separates Apple from so many of its smart phone competitors.
UPDATE 2: Excellent analysis by Andy Zak, railing on the impact of Apple’s decision to pursue subscription-based accounting on iPhone and its deleterious impact of Apple’s PERCEIVED financial picture based on GAAP. Also, good fodder on how iPhone/iPod touch are natural cannibals (you buy one or the other), but rather than the story being about aggregate unit growth, it is ALWAYS about one coming out of the hide of another, and then how slowing growth of the particular product becomes the story, not the rising tide for Apple Co. in total. A lot of this is a natural by-product of business media and analysts’ inability to parse nuance, focusing instead on selling the sound bite. His provided tables (see thumbnails below), showing Trailing Price-to-Earnings and Price-to-Cash ratios relative to peers is particularly instructive.
Trailing Price to Earnings
Price to Cash
Related Posts:
- iPhone 2.0 - What it Means to be Mobile: a detailed summary of my experience to date with the iPhone 2.0 platform.
- Innovation, Inevitability and Why R&D is So Hard
- Holy Shit! Apple's Halo Effect: how Apple has turned gravity into its friend.
- The Chess Masters - Google versus Apple: why partners Apple and Google are without peers, and (seemingly) destined to become frien-emies.
- Ringing Up Apple's Earnings Call: analysis of last quarter's earnings call.
