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Apple at $600. Who knew?

Apple’s share price has increased rapidly in the last few weeks. The rise to $600 was swift and broke the pattern of slow growth the the stock was able to obtain over the past few years. The level, however, shouldn’t have been a complete surprise.

I think Apple is going to $600…It’s really not that complicated. Apple has a number of key drivers in its business model which have yet to be properly priced into the stock because I think it’s very cheap at this level.

-Stephen Coleman, chief investment officer at Daedalus Capital

This prediction was made October 26, 2007. On that date Apple’s share price closed at $184.7. It may have seemed like a bold bet, but as Coleman noted, the reason why it would reach $600 was easy to spot.

The real story on how I get to that valuation doesn’t even involve the sale of (the Leopard operating system) or the growth in the Mac business. How I get there is through the iPhone itself.

What was not easy to tell was when it would reach $600. Back in October 2007 the stock had a P/E ratio of 48. It’s PEG(trailing) was 0.65, and cash per share was $17. Sales were $6.6 billion for the quarter and earnings were 98c/share. If an analyst were to take those ratios and apply a forecast of sales five years hence, the $600 price would have been reached much sooner: Sales had tripled by 2010 and earnings had tripled by 2009. In contrast, the stock took until 2012 to triple.

The delay of one or two years is perhaps reflecting the risk involved in investing. Namely, you can predict outcomes but not their timing.

But still, we have to return to the question of why the stock has rallied in the past few weeks. There has been no new information about the company since it reported earnings and any product launches (e.g. new iPad) or increased distribution (China) are completely predictable.  Curiously, the market did not react until late in the quarter. The following chart shows the phenomenon.

(Note the two scales on the left: inner is share price, outer is net sales)

It shows the share price as a line superimposed on the sales chart with stacked product revenues. The recent rise can be attributed to the rise in revenues/earnings from the fourth quarter. But why would a stock react in March to data from six months earlier (and published two months earlier).

Classical market theory suggests that markets anticipate and “discount” the future. Efficient markets supposedly react to all available information and do so instantly. If that was the case, the chart above would show the red line shifted significantly to the left.

What we are observing is market inefficiency.

Inefficiency implies that perception of reality is not the same as reality. It happens when people are reluctant to believe the truth. It’s also implies that with $15 billion being “bet” on the share price every day, each one of those bets is misinformed!

The cause of this divergence between reality and perception is that disruptions are divergent from perceptions. A disruptive company always “leads” its valuation. There is cognitive delay for the vast bulk of observers. You can then argue that for those, like Mr. Coleman, that don’t suffer this delay, there will be profit.

  • Bernard

    To explain the recent clim, two elements are important:
    1) Steve Jobs is dead and it’s no more an alea
    2) Since the beginning of 2012 we knew that a dividend should arrive

    • http://mark.opineapple.com/ Mark Newton

      I agree. The recent surge has a lot to do with Cook signalling his recognition that AAPL has more cash than it needs.

    • http://www.asymco.com Horace Dediu

      Steve Jobs left the company long ago. Apple’s cash and its growth rate have not been matters of speculation. That there would be a need to return some of that also seems blatantly obvious. The point is that markets should foresee these things rather than wake up long after they are obvious.

  • gbonzo

    I you would choose the scales differently, the red line would be shifted to the left. The redline being “not shifted to the left” is the result of the relative scales you have chosen.

    • http://www.asymco.com Horace Dediu

      The horizontal axes are the same. Different vertical scales would move either chart up or down. The scale of both charts is arranged so that they match in the current period.

      • gbonzo

        Yes. And if you move the red line up, it actually seems to move to the left too, because both are rising patterns. Try it out, if you do not believe me.

      • Steve Walkman

        I still don’t understand. I assume those are calendar quarters. The stock didn’t hit 600 until well into CQ112. But you’re showing it at 600 in q411.

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  • http://twitter.com/RagingTBolt Raging Thunderbolt

    I doubt that the recent surge has anything to do with Apple being disruptive, anything to do with dividends, etc. — in fact, nothing special about Apple. As The Economist summarizes (http://www.economist.com/node/17848665), the momentum effect holds for stocks generally and other financial instruments such as commodity prices.

    • davel

       broken link with the economist.

      I think the surge has to do with dividends.

    • sigaba

      S&P is up 8% in the last 12 months, this does not explain Apple’s 100% stock price appreciation in the same period

    • barryotoole

      Please relink; the present one is not working. Thx.

  • Ncgo4

    What is most “inefficient” about the market is the denial of what is ahead. Most analysts predict a cratering of the current 100% growth down to something like 15% to 20%, or. Less, in the next 12-15 months. There seems to be an almost complete market denial of reasonable estimates of Apple’s growth potential.

    • davel

      Most analysts are either creating a pessimistic projection or just clueless. I have seen analysis of this company this week where the guy takes a cookie cutter analysis of the numbers, uses off the shelf projections based on industry norms and comes out with a prediction. I think I was watching a motley fool tape. The point is the bean counters have their nice little models and put everything in. Apple historically does not fit these models and so they don’t work. These people do not care to investigate why the model fails to predict the outcome and use it again.

      This is why the models failed and the financial collapse of 4 years ago and everyone was surprised. This always happens. They build a model. It works for a while. Then it blows up when the data goes against them. Companies take a bath and they start over.

      My fear is that Apple is conforming and in so doing falls back to everyone else.

  • sscutchen

    “There has been no new information about the company since it reported earnings and any product launches (e.g. new iPad) or increased distribution (China) are completely predictable. ”

    What seemed different this past earning reporting period was that so many competitors reported lousy earnings.  This was the Christmas quarter, and not only did Apple truly blow past most earnings estimates, but many competitors fell short.

    I would suggest that the lag in the stock price reflecting the underlying value of the company is finally being corrected because the non-technical investor is finally convinced that the Apple phenomenon is real. Apple’s technological moat is hard to understand for the average investor.  But the financial results, finally, are not.

    • http://wmilliken.livejournal.com/ Walter Milliken

      The problem with this “comparative performance” theory is that it should have been apparent when Apple sailed through the Great Recession nearly untouched, and most other companies were seriously hurting. But the analysts at the time were predicting Apple would be more hurt by the high price point of their products than their competitors. It didn’t happen that way, but I don’t see why analysts should suddenly wake up to reality just now.

      • ChKen

        Actually, aren’t you arguing the analysts are stupid, rather than asleep? People can wake up from a slumber, I’m not sure there’s a cure for stupidity.

      • http://pulse.yahoo.com/_ZI7FPYPQXPFVRDQKHCOUD3RFRI patrick

        I think he should argue that analysts are working for someone other than the person paying the freight.  Whisper numbers, you are one of my big clients so I am going to let you in on some research numbers on Apple, or I bought Apple in my portfolio and it is my top earner.  Take your pick, but the implication is that Wall Street lies when it calculates it’s public numbers.  No other answer fits the data.

      • http://www.asymco.com Horace Dediu

        I believe that it’s illegal for a sell-side analyst to say anything privately that he has not said publicly. What they sell however is not insight. They sell a recommendation. That means that they are not motivated for accuracy but for a statement that makes their recommendation look correct.

    • ChKen

      I think all the complementary stories, of companies in Apple’s supply chain have helped as well. Whether it’s Broadcom or Foxconn, I think those results have been confirmation of Apple’s results and fed into the current momentum.

  • KitFR

    The markets might well be inefficient, but this hardly explains Apple’s sudden rise. What about the slew of theories on why the stock simply could not rise? No buyers; crashing margins; Android; blah, blah, blah. Something changed and it was hardly retail-investor sentiment or company fundamentals. Insider information on the dividend announcement must represent one piece of the puzzle, global liquidity and the resulting melt-up rally another piece. “Follow the money,” if that is even possible in today’s shady markets, must lead to the real answers.

    • http://twitter.com/ChristianPeel Christian Peel

      I had no insider information, yet I was convinced that Apple would give a dividend. Even with the dividend and buyback, they’ll still grow their cash. Horace has posts showing the correlation between the stock price and Apple’s cash. 

      I think that more casual investors who did not previously watch Apple woke up to some of these facts in recent months.

      • KitFR

        I cannot believe that casual investors could move any stock a quarter of a trillion dollars over three months. Bigger fish are swimming in these waters. Does $10 of dividend/year justify a $200+ run up? Something more is going on.

      • http://wmilliken.livejournal.com/ Walter Milliken

        It may be that a lot of stock funds are using Apple as “window dressing” here at the quarter’s end, given all the press about the price run-up recently. That does beg the question of what started the run-up, though.

      • http://twitter.com/ChristianPeel Christian Peel

        I should have written ‘less-well-informed about AAPL’ instead of ‘casual’;  i.e. people who do not read asymco often.  I think there are many investors who have large amounts to spend who have only recently recognized the value of Apple. Combine this with the FQ1 2012 results and you have a run-up.

  • EdKent

    Just go with it and make money. A hot stock is a hot stock. Revenue is revenue. Apple is being Apple and finally getting justifiably higher stock prices and will continue to do so until we see $1500 to $2000. iWallet will change everything. Enjoy the ride.

  • http://twitter.com/e_orione Emilio Orione

    Assuming a smart and efficience market is old theory, now it’s cool behavioral finance.
    We have a men made market with all the inefficiency of man perception.

  • tucson

    I believe Warren Buffet already proved the efficient market theory as being wrong. But it is still taught in top MBAs I hear.

    • davel

      Did he? I will have to look that up.

      Yes. I believe the efficient market theory is bogus. The price of Apple is exhibit A. As the most visible large cap stock it is analyzed to death. Its growth in revenues and income has been exceptional and yet by valuation metrics like PE it is valued like US Steel which loses money.

      My current take is institutions have their limits on what individual stocks can have and Apple hits those limits so they pull money. Or they need money for other things and trim their exposure to raise cash. And then there are the market games some players engage in.

      But now the stock jumps $200 in a few months because of rumors of a dividend. This is after Apple announces breakout holiday season numbers.

  • vincent_rice

    Steve Jobs was admired but deeply misunderstood. Tim Cook looks ‘normal’ to the big investors. The dividend story shows that he understands the ‘game’ and that Apple will act more like a traditional multinational corporation. As Apple-watchers we know that’s not the case but the perception has clearly shifted.

    • davel

      I agree. The only driver of the price I see is the widespread anticipation of a dividend. Nothing else seems to be a catalyst for the stock.

    • ko

      While there may be other reasons, I too believe it is clear that a dividend anticipation was in effect. Lets look at the facts, apple reported massive earning in January and the stock rose in one day from about 420 to just under 450 (about a 7% jump).  Now this was a big jump, but I was still a bit surprised we didnt see 10 percent after that blowout.  The question is, was the run to 600 a result of delayed reaction to those earnings?  Maybe, but coincidentally or not, a dividend was around the corner, and IF word got out (which it probably did) that apple was dishing out around 10 per share, at a stock price of 450, thats a 2.2% yield…!!!!  Quite high for a tech company growing like apple.  So, what happened, price went to turn that yield into AT LEAST 2% (still high) at stock price of 500…  And then the move to 600, cause yield is STILL well above above 1.5%…  Dividend must st least be discussed in this movement…  but earnings did play some role….

    • Chandra

       What “game”? There is no one game. Apple does not have to do any financial engineering to boost the stock up. Declaring dividends and buying back stock are techniques companies in distress try to do to boost the stock price. It is very clear to everyone that is not the reason Apple did those things. The dividends provide a nice cushion. If stock price drops a lot, the dividend rate will go up which will bring buyers.  The share buy back to neutralize dilution is another measure by which Apple provides stability to earnings per share. It takes away a variable, namely the number of outstanding shares. These two provide for the externally accessible cushion. The cash in hand which is still projected to grow provides a nice internal cushion.

      All three provide stability to the stock. A stable stock is less risky and so it gets a higher P/E relative to the (mis)perceived growth potential..

      • vincent_rice

        The ‘game’ of appeasing investors’ feelings of entitlement. Something that Jobs had no interest in.

    • http://www.asymco.com Horace Dediu

      So it follows that Steve Jobs was Apple’s greatest liability.

      • vincent_rice

        Ha! That’s not quite what I said Horace. You don’t believe there has been a perception shift? An understanding that Tim Cook is a more conventional business character?

        I love this blog.

      • http://www.asymco.com Horace Dediu

        I understand completely. Just reducing commonly held perceptions to their absurd ends. I actually did predict in June 2010 that Jobs’ departure would cause the stock to rise, much to the horror of the audience. I even concluded that he was a liability in valuation but not, crucially, in value.

      • fring

        ‘So it follows that Steve Jobs was Apple’s greatest liability’
        I see what you did there ;-)
        …but I sort of agree. In the eyes of the conservative investor, Steve probably came across as unpredictable and Apple’s rising wealth as unsustainable, or suspicion and unreal rolled into an investment risk. With one negative out of the picture, common sense ie no fear, returns and ‘Apple looks interesting’. But I can’t account for the rush.
        I say ‘sort of agree’, but really Horace, honestly, I think that seeing your charts everywhere on the net, and quotes, is doing ‘something’.
        I’d wager your site traffic might even mirror…ooooerr… some other company’s popularity?
        I agree with @vincent_rice
        I love this blog.

  • Chris C

    I believe some of the recent price movement is attributable not only to the realization of the global opportunity for the handhelds, but also the idea that the iPads represent recurring revenue as replacements for the PC in the eyes of the consumer. I think the risk is being taken out of Apple as the revenue line is no longer seen as a hill but as a plateau.

  • r.d

    After the meltdown,
    Banks were investing Federal Reserve money with Treasuries and 
    inflating other currencies.
    While Federal Reserve was buying up Gold, commodities.

    Now the Federal Reserve is pumping the Stock Market to
    drive Inflation.  Treasuries are no longer sure bet either.
    So that just leaves Apple is the  premium stock.

    Also if Android hadn’t come along.  The Stock would have reached 600 
    sooner.

  • ZzYyZz

    at $750, the stock price could corrupt within 20 months. After the arrival of iPad4 at Q4, % sales will reach its peak. As well, 1 out of every 4 iPhone users are required to repair their phones within 2 years.

  • http://search.websonar.com:8080/ Duane Bemister

    Maybe it’s as simple as fewer sellers.

    • Sacto_Joe

      At bottom, it’s always that. The more a thing is prized, the more likely it is to be hoarded. And the more it is hoarded, the more it is prized!

    • graphex

      Yes, it really is as simple as fewer sellers. I (and many others) are NOT going to sell our shares at the present price. This means many shares are ‘out of circulation’. Less supply = higher price. 

  • Roy_liu

    I would also posit that AAPL’s stock was actually being held back by investors’ uncertainty as to the impact of SJ’s passing. Now that the event has happened, investors are incorporating that into their view of the future of AAPL and concluding that the current Sr mgmt team will not be dilutive to shareholder value with SJ gone.

    • http://wmilliken.livejournal.com/ Walter Milliken

      I don’t think this makes sense as a theory, since Wall Street seemed to have gotten comfortable with Tim Cook a while before Steve Jobs died, and the main reason analysts cite for negative outlook from Steve Jobs death has to do with a potential lack of future innovation, which can’t really be evaluated for a few years.

      It might be, though, that Wall Street sees Cook’s recent actions as more shareholder-friendly, while Jobs was indifferent to the Street. I.e., they may seeing Jobs’ death as a *positive* by releasing Cook from Jobs’ (to them) irrational control.

      • RogerMercer

        The market truly does detest uncertainty. Once Jobs died and that uncertainty was removed, Apple’s stock price was free to ascend to a price more appropriate to its growth and earnings.

  • MOD

    If you all don’t understand, how do you expect people in the market, who know less than you, to understand?

    Most people are idiots. They are no less of an idiot when they trade stocks. In the market they are idiots too, so the market does idiotic things. This is Warren Buffet’s “efficient idiot” theory.

    It may take them a few years to see the value that an discerning investor can see in a few days.

    • Sacto_Joe

      I really like this post! We’re the people who understand Apple. How come we’re having such trouble agreeing? And if we can’t agree, how can we expect those who know less to agree?

      My personal theory is that this is the coiled spring uncoiling. We’ve seen the P/E compression over the last few years. We’ve seen the inexorable growth in Apple revenue and earnings. The wonder is that it took this long for that spring to unload!

  • Z Kariv

    Perhaps many of the ideas expressed so far combined to a perfect wave:dividand (and the concept of insid trading), a lag time from imperfect market forces, lack of true alternative, especially in the tech sector (where Samsong becomes the defacto Droid and Google facing a global anti-trust probs–substencially diferent from Apple legal scrimages), rumors of ITV and a better understanding, hance less fear, of the mithical big number’s company.

  • chano1

    Cognitive dissonance among would-be investors who simply could not believe that Apple defies gravity pro tem – leads to paralysis. Fear of involvement was the key factor.
    Q1/12 results were so very good, they shattered that paralysis and illuminated the path that (we all knew, ahem) was open only to Apple….. 

    and.no.other

    Cognitive resonance prevails, pro tem.

  • ChKen

    I believe this market inefficiency is also evident in the chart you use showing how the share price has tracked Apple’s cash over the last 4 years. I think that correlation is evidence of the market breakdown in valuing Apple’s future cash flows. How can tracking past cash be predictive of future cash flows?

  • ChKen

    I believe this market inefficiency is also evident in the chart you use showing how the share price has tracked Apple’s cash over the last 4 years. I think that correlation is evidence of the market breakdown in valuing Apple’s future cash flows. How can tracking past cash be predictive of future cash flows?

  • Xavieritzmann

    People are just now realizing that APPL is the new MSFT.
    I wonder if this is a good time to short MSFT.

    • Ronin48

      NO!

      He’s saying people are just now realizing that Apple had a great calendar Q411.

      He’s implying that calendar Q1 2012 earnings are not priced in because AAPL leads the market.

      Apple is a disrupter.  MSFT is not and never has been a disrupter.

  • http://www.facebook.com/profile.php?id=644846198 Ron Smith

    It is very simple.  Apple caught the wave of the Post-PC mobile computing era early and is leading it.

    I remember reading the Morgan Stanley Mobile Internet Research report back in late 2009, I think it was.  I said to myself “Yes, this is it.”  I have been long AAPL shares and options since then and will continue to be until there are material changes.

    This is a major wealth creator and will continue to be for at least another couple of years – I can’t really see farther out than that.

    • davel

      You could argue that Apple is leading the post pc mobile computing era and even created it with the iPhone.

  • Roger_sach

    Wall Street is finally recognizing China as the driver for global growth and economics. That vast country has begun to transform itself or at least balance itself as both a major exporter and consumer. China will rapidly grow it’s economy as consumer because of it’s balance sheet and to reduce it’s dependency on exports. The central government is encouraging it’s people to consume. Also Chinese, much like consumer driven Indians, are very brand conscious and Aaple is one heck of a brand to own in China both for consumption and status.

  • Tim0

    Stephen Coleman is a controversial figure, having been fined for alleged securities fraud… http://www.bizjournals.com/stlouis/stories/2010/03/29/daily59.html

    • Ronin48

      What’s your point?

      Horace didn’t say to give the guy money to invest.  
      He was just pointing out the prescient call by Coleman based on reality rather than a false perception.

      • Tim0

        Horace didn’t directly say to invest money with Coleman, but this article reads like an endorsement for him. Despite Coleman being one of the first I can recall to say Apple was going to $600, if you read or listen to him, he sounds much more like he’s just trying to suck in naive investors with seemingly outrageous calls that would make them rich rather than providing thorough and sound analysis of Apple’s prospects. His past investors have allegedly suffered because of that.

      • Ronin48

        It’s not at all an endorsement of Coleman.  

        Coleman’s call is simply one illustrative example of a call based in reality and the recognition of disruption instead of the more common method of sticking with dogma, false comparisons, and faulty perceptions.  Re-read the article.

  • Ian Ollmann

    Will we be hearing from Stephen Coleman on a future Critical Path?

  • RogerMercer

    I’m about as pro-Apple as any investor could be, but I think the stock may be due for a 10 percent to 12 percent pullback before moving inexorably above 800.

    • Ronin48

      A 10-12% pullback based on what data and facts?

      • Newton

        Gravity.

      • Ronin48

        This isn’t physics Newton.  

        Where are your facts and data?

    • Chandra

       I am definitely prepared for a 10 to 12 percent pullback and it would not faze me that much. But that is not because of any predictive capabilities I have. It is just the nature of the market and especially so for a high beta stock like Apple.

  • RogerMercer

    I see dividends as a company’s admission that it can’t figure out how to use its cash to make even more profit, products, jobs, etc. Dividends are a signal of the failure of creativity. 

    • my_brain_is_mush

      BS.  Another stereotype like the “law of large numbers”.  Not true in this case.  Dividends in ***this case** signal extreme efficiency.

    • Prettyblueplanet

      Reinvest it in more shares. Beats their cash ror of 1%.

    • Steve walkman

      Agreed but so what?

  • T Crawford

    $693.00 by year end.

  • Ecubed3

    I can’t speak the investment lingo but I can give my two cents on why I recently invested in AAPL for the first time. It was the first time in several years I had the luxury of investing for the future vs. making ends meet. So being about 10 years behind in saving for retirement, I wanted some aggressive stock to supplement my mutual fund. I’m an Apple fan, have been a Mac user for a couple decades, I’m

  • Chandra

    The compressed PE to perceived growth ratio is indeed based on fear winning over greed in the case of Apple. That is not the case with companies like Amazon or Chipotle. In Apple’s case, people just do not believe it will continue to grow at 60% levels far into the future. So what has changed in the past 3 months. I think it is Tim Cook.

    He has been making very carefully worded bullish statements of late.

    So what did Tim Cook say that is different from before. Main thing is his statements about how big the market for smart phones is. I sensed a definite change in tone when he talked about it in the last conference call and also in that Goldman Sachs conference and again during the new iPad press event. Apple has always talked about their bright prospects before but the change in tone is quite strong, confident and convincing. The same is true about what he said about iPad prospects.

    I think at a subtler level, the fact that Tim Cook is making these statements as CEO also matters. Steve Jobs had the reputation of being a “character” ( a bit volatile, bitter towards competitors etc. ) while the market recognized him as a genius and a visionary. While the market was confident that Apple will produce great products, they were not sure about the addressable market and hence how far the growth can continue. Tim Cook does not have any baggage and he seemed to have established himself well with wall street. They also believe he is an able competitor. The market believes that there is no reason for Tim to be unnecessarily pumping up the good news, so they trust pretty much everything he says.

    So, I think what changed in the last three months is the very confident messages about the addressable market for smart phones and iPads and the fact that it is Tim Cook who is making them unequivocally. 

    I see the P/E expanding to 20 and oscillating between 18 and 22 for the next few quarters.

    • Prettyblueplanet

      I think you said some very wise words!

    • davel

       I want to add the dividend rumors. This has turned out to be very powerful. Nothing motivates wall street like greed. Apple has reached out to them on comments and they said dividend and buyback. They got both. Wall Street is very happy with Tim.

      I hope Apple does not start trying to please the street.

    • eorns

      You’ve hit on something with perceptions of Jobs vs Cook. If Jobs made wildly optimistic or bullish statements they were part of his legendary “reality distortion field”. But now when Cook does the same, it’s perceived as more “serious” and “grounded”. Especially since he actually engages with and doesn’t show contempt for Wall Street.

  • DrJohn

    $780 by 1/1/13; $1000 by 1/1/14

    • Oak

      yup

  • Westechm

    For many reasons it took a long time to generate enough believers that Apple was for real.  The last blow-out quarter made a lot of converts, as did a lot of other things that happened.  Another blow-out quarter like the last one will generate even more converts.  I believe that it is likely that panic buying by those who are afraid to miss the boat will drive the stock higher than is justifiable, thus generating a bubble.  Bubbles inevitably break, but the generation and inevitable collapse is still several years away and I plan to keep riding the wave although I might take some money off the table in a year or so.

  • Joe_Winfield_IL

    2011 was obviously Apple’s best yet, by far. But it was also chock full of negative stories and perceived headwinds. Some were specific to Apple, others were industry-wide, and others were macroeconomic in nature. In rough chronological order:

    *Steve Jobs takes medical leave on the eave of Q1 earnings.
    *Japanese tsunami causes parts shortages for all types of electronic components.
    *Android surges in market share.
    *iPhone is kicked off its usual refresh cycle with no June announcement.
    *Steve Jobs resigns as CEO.
    *Fears of Greek sovereign debt and contagion in The euro zone

    • Sacto_Joe

      You left one major negative and two major positives for the economy:
      The negative:
      The Republicans stonewalled with the debt ceiling, causing a drop in the U.S. credit rating and a concomittant loss of confidence in the economy;
      The positives:
      The President took the Republicans to the woodshed on tax cuts and unemployment extension;
      The U.S. economy finally showed strong signs of recovery this winter.

  • feedback12

    Good article. What changed this year that unleashed Apple’s stock price?

    If we agree that the share price has been successfully manipulated to the downside over that last few years, then is it possible that what changed was actually the position of those involved in the manipulation?

    Perhaps the recent trader investigations dislodged a cog in the wheel of a group of people profiting from the rumor-driven price swings. Alternatively, those most influential decided there was more money to be made on the long side.

    Whatever the reason, the recent run-up is enough to make long term investors nervous even though Apple’s valuations are still quite reasonable.

    • Sacto_Joe

      So long term investors weren’t nervous while the stock was practically moribund, but now that it’s made up a little for lost time they’re nervous? Speaking as a long term investor, I couldn’t disagree more.

      • feedback12

        We can agree to disagree :) . Spoken as a long term investor who is happy but nervous about the run up.

        Jason Scharwz is attributing the unleashing of the stock to Tim Cook’s unpredictability and transparency which makes the stock more difficult to manipulate.

      • Sacto_Joe

        You’ve got nothing to be nervous about. Apple is as solid as a rock. $615/share is still cheap, and Jason Schwartz would be the first to agree. However, this major runup in the stock has taken a lot of what I call “players”, like Jason and Andy Zaky, by surprise. I know this for a fact, having atrended the recent Apple Investors Summit in Los Angeles. And yet, it is all a perfectly logical progression, when looked at as a series of event.

        Consider: The P/E had climbed to almost 16 just before earnings were announced. That was perfectly logical, considering the compression the stock had received in the previous quarter due to the “disappointment” of both a delayed iPhone introduction and the presentation of “only” an iPhone 4s, coupled with the growing anticipation of the announcement of good iPhone sales over the holidays.

        But very, very few predicted the incredible blowout that actually turned out to be the case, although Andy Zaky was a notable exception. The stock P/E plunged under 13 in the space of a day. That was the match that lit the fuse. The signs of an improving economy added extra fuel to the blaze, as stocks in general took off. Then, of course, Cook let it be known that Apple was finally going to pay some serious attention to the issue of its burgeoning cash position. That fanned the flames further. The iPad launch grew imminent, growing the flames even higher. Then, in succession, Tim Cook announces a dividend, a stock buyback, and record iPad sales. The flames grew higher still. Suddenly, we’re one short month away from next quarter’s earnings announcement. Coincidentally, it’s “windows dressing time” when all the funds try to gussy themselves up by buying into successful stocks. Thus, even in a down market, Apple holds its own.

        Which brings us to where we are, just a couple of weeks from Apple’s FY 2012 2nd quarter earnings report. And the anticipation of those earnings are practically guaranteed to continue juicing Apple’s stock price. And if, as I strongly suspect, those earnings are once again spectacular, then we’re going to see a strong move in the stock next quarter as well.

        IMHO.

  • MOD

    I think a better question is what PE will Apple reach, not what price.

    I just met amateur options traders, who traded for years, but don’t know what a PE ratio is.

  • Garyk

    Based on the financial data available, what is Stephen Coleman’s outlook on the price target now, not timing for the PT to be reached, just the price? 

  • fring

    ‘ A disruptive company always “leads” its valuation.’
    Yes.

    • Studentrights

      ‘A disruptive company always “leads” its valuation.’

      The best 2 seconds of reading so far this year.

  • Mickey

    The alleged fraud appears to be all false allegations as Coleman won the case in the court of Law against Missouri ..Not an easy feat to defeat the state and politicians ..Here’s an extract from his company’s website

    http://www.wegrowmoney.com/ourstory.html 

    Also look at the performance numbers on his website .. I think they got to be real otherwise they wouldn’t let him keep ‘em on the site especially if he has been fighting the politicians :-)

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