As the chart below shows, the last quarter (third calendar, fourth fiscal 2011) was slow with only 52% earnings growth. The discussion centered on the (surprisingly) disruptive effect of the iPhone transition. Surprising since most analysts, myself included, were lulled into thinking that the portfolio of iPhones and their wider distribution would create a smoother sales pattern vis-a-vis the more cyclical pattern seen in the first three years of production.

The second quarter was surprisingly strong and the third was surprisingly weak. So how do we estimate the fourth? Continue reading “Estimates for Apple's first fiscal 2012 quarter”

In last week’s discussion of Apple’s (historically low) valuation, comments arose that perhaps the company’s discount is not unique. Can we look at comparable companies and determine whether the relationship between growth, size and valuation are consistent?

The challenge is in finding “comparable” companies. Apple is characterized by being large in terms of market capitalization, highly profitable, in the technology sector and growing relatively quickly. One can find a cohort of companies with each of these characteristics but not all.

Here is an attempt at looking at the largest companies by Market Capitalization (the so-called Mega-caps) to spot patterns of valuation. Some of the companies in the top 20 mega-caps were technology companies so I thought I’d highlight them. I then also added a few of the top 20 technology companies by capitalization to create a larger sample.

The group I settled on is shown in the list below ranked by market cap.

Companies below $130 Billion in market cap (i.e. below Novartis) are in the top 20 technology list but not in the top 20 overall list.

I then plotted the P/E rate vs. 5 year Growth Rate for these companies, separating the tech sector by color (Red):

The pattern is not encouraging. It appears that there is no correlation. Perhaps the technology companies are, as a group, further up and to the right, but overall they are equally unobservant of growth.

For example, SAP has grown less than 5% in five years and yet enjoys a P/E of 20 whereas Microsoft has grown 18% and has a P/E of less than 10. The non-technology sector companies are similarly broken. Berkshire Hathaway, a conglomerate, is rewarded for slow growth and China Mobile is punished for relative high growth.

But you’ll notice that some companies are not on this chart. That’s because they are outliers. Their growth or P/E are so far out of this cluster that the would make it impossible to discern individual performance. The complete “top 20” picture is shown in the following chart which will require either a large display or a lot of scrolling (1300×1364 pixels): Continue reading “Does Growth Matter?”

Andy Zaky at Bullish Cross wrote a great post on Apple’s valuation, showing the deep discount of Apple’s earnings vs. an average company. It essentially states that Apple’s money is not green.

Felix Salmon took it forward by enumerating a few explanations that might be used for the despondent valuation. None are successful arguments, but that should not be a surprise.

To understand the phenomenon a bit more precisely, I maintain and think about these charts:

This shows Apple’s share price (“P” in blue) and its earnings per share (“E” in green). In addition Continue reading “The thermodynamics of Apple's share price”

Warning: This requires Flash.

This is a data set that shows Apple’s product-level performance according to Units sold, Average Selling Prices, Cost of Sales, Gross Margin, Unit Growth, Revenues, Revenue Growth and Gross Margin contribution. It, along with all the other data sets are available under the Products menu at the top of this page.

Default settings:

• Line Chart
• Y-Axis set to Revenues.
• Color set to GM (Gross Margin percent).

Continue reading “Interactive charts for Apple's product lines”