Apple has had several corrections of 10% or more during its explosive growth over the past 5- and 10-year periods, as noted above. That should give shareholders comfort the current selloff will be short-lived and, potentially, a buying opportunity. As Michael Santoli notes in the accompanying video, Apple's business prospects haven't changed dramatically since its April high, certainly not enough to justify the rapid selloff. (He also notes, correctly, that Apple hasn't been a market bellwether in recent years, despite its market-cap. The stock often rallies when the S&P is falling, and vice versa so don't let The Drudge Report scare you about Apple triggering a broader market rout.)But discretion being the better part of valor, let's remember Apple shares fell nearly 50% from its peak in September 2012 to its trough in April 2013. In that case, the bears were correct and the second generation iPhone 4 (the 4S) upgrade cycle was less exciting and less profitable, as my colleague Aaron Pressman notes. Maybe investors are fearing a repeat of that dour performance ahead of the 6S upgrade cycle, coming as soon as next month according to the ever-busy Apple rumor mill.
Apple, Apple And More Apple: I Am Not Selling Any More Apple Shares
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From our perspective, Apple is the world's greatest consumer product innovator and has one of the strongest and most respected brand names in history. We consider Apple to be our most compelling investment. I first informed my followers on Twitter on August 13, 2013 of my "large position." I also expressed to you my opinion that "a larger buyback should be done now." At that time, we owned 3,448,663 shares and the stock price was $467. Since then we have purchased an incremental 1,282,076 shares (bringing the total value of my position to $2.5 Billion) and we currently intend to buy more.
While this would certainly be unprecedented because of its size, it is actually appropriate and manageable relative to the size and financial strength of your company. Apple generates more than enough cash flow to service this amount of debt and has $147 billion of cash in the bank. As we proposed at our dinner, if the company decided to borrow the full $150 billion at a 3% interest rate to commence a tender at $525 per share, the result would be an immediate 33% boost to earnings per share, translating into a 33% increase in the value of the shares, which significantly assumes no multiple expansion. Longer term (in three years) if you execute this buyback as proposed, we expect the share price to appreciate to $1,250, assuming the market rewards EBIT growth of 7.5% per year with a more normal market multiple of 11x EBIT.
It is our belief that a company's board has a responsibility to recognize opportunities to increase shareholder value, which includes allocating capital to execute large and well-timed buybacks. Apple's Board of Directors does not currently include an individual with a track record as an investment professional. In my opinion, any further delay in executing the buyback we hereby propose will reflect this lack of expertise on the board. My firm's success and my expertise as an investor would be difficult for anyone to argue. Per my investment thesis, commencing this buyback immediately would ultimately result in further stock appreciation of 140% for the shareholders who choose not to sell into the proposed tender offer. Furthermore, to invalidate any possible criticism that I would not stand by this thesis in terms of its long term benefit to shareholders, I hereby agree to withhold my shares from the proposed $150 Billion tender offer. There is nothing short term about my intentions here.
(AP) -- Should you buy or sell Apple? googletag.cmd.push(function() googletag.display('div-gpt-ad-1449240174198-2'); ); After the announcement that Steve Jobs is stepping down as CEO, investors pushed Apple's stock down 0.7 percent on Thursday. By contrast, Wall Street analysts reacted with predictable optimism: Buy - a lot.So who is right? The pros or the investors?The short answer may be the pros, though the stock is probably not the bargain that many of them assume.One popular way to value a company's stock is to look at how high it is trading relative to its earnings per share. It's a rough measure, but it does show that Apple is not much more expensive than the average company. At Thursday's closing price of $374 per share, Apple is trading at 12 times its expected earnings over the next 12 months compared with 11 times for the Standard & Poor's 500 index.Translation: For every dollar you spend on Apple, you should expect roughly the same earnings as you would get on the average company.The difference, of course, is that Apple has a tendency to beat expectations and send its stock soaring. It's up 16 percent since Jan. 1, and it briefly topped Exxon Mobil this month as the most valued U.S. company.One reason the stock trades at a discount to its stellar reputation is a bit counterintuitive: The company has been so successful at producing hot products, starting with the iPod in 2001, then the iPhone in 2007 and last year's big hit, the iPad. The problem is, no one knows if the company can keep this up, especially now that its visionary CEO is resigning (though he will stay as chairman). If Apple doesn't produce more big sellers, estimates of future earnings may prove too high.But Shaw Wu, an analyst at Sterne, Agee & Leach, says investors are confusing the image of Apple as an innovative, rebel company with the less colorful, but reliable profit maker that it is."It's not just a company producing hit products," Wu says. "The earnings have become more predictable." (adsbygoogle = window.adsbygoogle []).push(); Despite the popularity of its iPhone, Wu estimates that it still only accounts for 5 percent of cellphones in the world. He believes the iPhone's market share could triple to 15 percent, especially given the opportunity in China, where the company has started selling. He notes that Nokia at its peak had 40 percent of the cellphone market.Similarly, Wu is bullish on Apple's Macs and iPads. He says they now account for more than 10 percent of the world's computers. He expects that to double. He says that Hewlett-Packard, at its peak, captured 25 percent of the PC market.Both Nokia and HP are now hurting in part because of Apple's successes with the iPhone and the iPad."China is the next big frontier," says Wu, who's been recommending the stock since it was $40. "It's where the next $100 (jump) could come in the stock."There are plenty of reasons for doubt, however. Even if Jobs had stayed on as CEO, the company faced numerous challenges. Rival phone makers such as Motorola, Samsung and LG Corp. are making inroads using Google's Android operating system for smartphones, which are just about as easy to use as Apple's iPhone. And the success of the iPhone and rival smartphones, which can play music and video, means fewer people need iPods from Apple.Then there's the challenge of mathematics. As a company gets bigger, it's harder to get the same percentage increase in earnings that investors have come to expect.Apple earnings have been growing an average of 60 percent annually over the past five years. But can investors really expect that to continue with annual earnings estimated to hit $26 billion the fiscal year that ends in September?Even Apple fans such as Timothy Ghriskey, co-founder of Solaris Asset Management, which owns Apple stock, notes that selling iPads and iPhones to the Chinese and coming out with new versions of old products will only go so far."There is predictability to the earnings two or three years out. But beyond that? Who knows what the next handheld communications device is going to be?" he says. "Apple has to keep coming up with the (next) new thing."To bulls, though, the benefit of buying stock now is that investors have already priced a bit of this danger into the stock."There's always the risk they'll lose their mojo, their magic," says Wu. "But that's why it trades at 12 times." 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
As iPhone sales have surged, so has Apple's stock. Apple shares have gained more than 50 percent over the last year, making it the world's most valuable company. The stock closed Monday at $132.65, up 1.8 percent for the day, and was rising another 1 percent in extended trading. 2ff7e9595c
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