ADD this: Apple's P/E punishment

Apple’s continuing valuation struggle continues to fascinate. While underperforming on a multiple basis both the S&P 500 and its own historic value, Apple is nearing bargain bin pricing.

To illustrate this further, get the new Asymco Data Download for the iPhone.

You can now use an iPhone to visualize how the owners of the company that created it are being punished.

  • Horace, do you have a view on the effect of Apple's product announcement strategy, which seems at odds with almost everyone else in this space in that they typically don't announce a product until they are ready to sell it.

    I haven't looked at the numbers, but I get the impression that the market tends to have unrealistic expectations in the lead-up to a product announcement event, leading to a sell-off after the event. Or is the market finally starting to grok the way Apple works, and this isn't quite as pronounced as it once was?

    I realise this is mostly the irrational response of the market, and you seem to prefer hard numbers, but I'd be interested to hear your thoughts on this.

    • Firstly, I think Apple product announcements ("the reveal") is done for three reasons: 1. so that competitors don't have any more time than necessary to copy the products 2. to create a sense of awe and excitement 3. so as not to freeze the market for older versions of the products.

      The first is a strategic reason, the second is a marketing reason, and the third is an operational reason.

      The reason others do the opposite is that they are themselves copiers and don't have anything innovative that others may copy, they know there is little to get users excited about and they have little legacy to freeze in the market. If anything, pre-annoucements may freeze competitor products, which is a good thing.

      One side effect of this event-oriented launch marketing is that it gives a tool for stock manipulation. There will always be opportunities to fool large numbersof people with manipulation and there is nothing that can be done about human nature. Witness the effect of the iPad launch when the stock went down significantly even though the product led to billions of dollars of net earnings within a few months.

      I'm no good at explaining psychological causes for market moves, but the pattern is there for anyone to observe. With Apple becoming so visible, more uneducated money will be involved in it and uneducated investors are easy prey.

  • Patience my young Padawan. This universe is full of creatures who act without the slightest understanding of what drives them to do what they do. The Tusken Daytraders are a pathetic life-form, filled with greed and beguiled by a game of chance. Their manipulations will be short.

    In time, the fundamentals will bring balance.