
Apple’s stock price falls to lowest point in six months - Quekster
http://arstechnica.com/apple/2012/11/apples-stock-price-falls-to-lowest-point-in-six-months/
======
Jabbles
Eugh. I don't get why anyone wants to read this mindless speculation. What
else do your tea leaves tell you?

"many investors were disappointed that Apple wasn’t able to blow through Wall
Street’s estimates"

Well, great. Maybe their goat's entrails didn't predict well enough last time,
but this time they were wrong the other way. Almost as if it were random - or
as if the market had already compensated for their predictions?

There is no new information here. So allow me to share my own totally
uninformed opinion about the future of Apple with you.

Apple sells physical devices for a massive profit. No one else has been able
to sell phones/tablets for so much. Apple will keep doing that as long as it
can, regardless of Google's efforts to undercut. I think Apple will pour more
effort (or just marketing effort) into their app store, trying to promote it
to developers as the "one you make money in, the one where people will
actually spend money on apps". Now I leave it up to you to make quantitative
predictions off that.

~~~
eta_carinae
> Apple sells physical devices for a massive profit. No one else has been able
> to sell phones/tablets for so much. Apple will keep doing that as long as it
> can, regardless of Google's efforts to undercut.

The article is about Apple's stock price, and I'm not sure you understand how
that part works.

Yes, Apple will continue to make billions of dollars every quarter for quite a
while, but their stock is likely to drop down significantly in the coming
year.

~~~
Jabbles
"their stock is likely to..."

Why? Don't just assert that it will do something. Their P/E is 12, so why
won't it grow? Why haven't traders seen this "likely" scenario and
sold/shorted Apple stock?

------
steve8918
(Full disclosure: I bought Apple stock and calls in the last 2 days, for a
short term trade. Yes, I was &*!@-ing my pants yesterday when it hit ~$505.)

The difference with Apple and other momentum stocks is that Apple isn't like
Netflix, where hype deeply overshadowed the problem they have with increasing
content costs, or Groupon, which simply has a terrible business model.

Apple makes an incredible amount of real money and real demand. In this 4th
quarter, Apple will make more money than Cisco will throughout its entire
year.

My concern isn't that people will all of a sudden stop buying Apple
hardware... that simply won't happen. They will continue to make billions upon
billions of dollars.

My concern is that there are a number of strategic missteps almost as soon as
Steve Jobs died. I think the iPad mini will cannibalize iPad sales completely
and I think a lot of strategic decisions appears to be fraught with confusion
and desperation, like Apple Maps, releasing iPad 4 6 months after iPad 3, etc.
I get the argument as to why they made the iPad Mini (my wife wants to get one
because it will fit in her purse easier), but I still think very few will buy
iPads, and they will need to double iPad Mini sales to make up for lost iPad
sales, but I guess we'll see in January.

The major difference with Apple and a company like Microsoft or Cisco is that
they don't have much recurring revenue streams. Most of their revenues come
from consumers purchasing their goods quarter after quarter. In order to keep
growing revenues, they really have to maintain their amazing pace of
innovation.

If they make a really bad strategic misstep, and people slow down in terms of
buying the products, it will show up immediately, and they won't have a strong
enterprise pipeline to buffer them. In 2011, Apple sales were about $60B. In
fiscal 2012, they were over $100B. So, could their revenues drop to $60B in a
year? It's not probable, but it's possible.

That being said, their PE ratio is ridiculously low, something like 10x next
year's earnings, and they have $120B in cash. They can do something ridiculous
like buy Facebook or even Cisco for cash, and still have more money than most
other companies out there, so there is a lot of room for dramatic and
aggressive action by Apple.

~~~
arn
I'd argue their willingness to cannibalize their exisiting products is exactly
why they are doing so well. The product that finally killed the iPod was the
iPhone.

~~~
wmeredith
Actually it was the iPod Mini that killed the iPod. Then the Nano killed the
Mini. Then the iPhone killed the entire line.

So, the spirit of your statement is right on the money. This is Apples truth
strength. Their lack of complacency.

The iPad Mini will eat the iPad. I would nearly guarantee that's the whole
idea.

~~~
nicholassmith
I saw it phrased as "Better to eat your own young than let something else do
it", which is slightly grim but I'd say close to the mark.

------
btilly
This looks like a follow-up take on the similar TechCrunch article discussed
at <http://news.ycombinator.com/item?id=4791710>.

Let me repeat my comment there.

I would personally not buy their stock any time soon.

I keep meaning to write a blog entry on this. To understand my reasoning it
helps to be familiar with The Innovator's Dilemma (see
[http://www.amazon.com/The-Innovators-Dilemma-Technologies-
Ca...](http://www.amazon.com/The-Innovators-Dilemma-Technologies-
Cause/dp/0875845851/ref=sr_1_2) for the book). The basic assumption of that
book (backed up with many examples in industries from ship technology to hard
drives to backhoes) is that any technology that has a well-established value
proposition will tend to show exponential improvement on that value
proposition over time. Users needs also follow an exponential curve, but it
tends to be slower than the technology improvement curve. (A lot slower.)
Therefore if you have 2 technologies competing for that market, eventually the
cheap crappy one will be good enough, and after that point hits it wins. The
premium technology will always show great revenue curves even once their low-
end users start switching, but those curves hide a great oncoming disaster.

In every market that Apple is in, it is the premium product. It has
competitors. And its competitors have a pretty good sense of the value
proposition that they need to deliver. Therefore every market line for Apple
is doomed. They show no signs of having new ones to wow us with, so Apple has
a world of hurt coming.

But, you may ask, why did they not have this problem historically? My answer
is because Steve Jobs' genius lay in constantly finding and delivering new
value propositions. He found and defined markets for pretty computers, light
laptops, smartphones, and so on. The whole Innovator's Dilemma argument
depends on competing on a known value proposition, and Jobs never sat still
long enough for his competitors to do that.

Of course Jobs is now gone, and there is no sign that Apple has anyone who has
that talent.

~~~
calinet6
Short-sighted drivel.

"In every market that Apple is in, it is the premium product." Why do you
think that is, exactly? Apple has quality products because it is a culture
designed to produce Quality. As long as that does not stop, they will continue
to absolutely pave the streets with their competitors' remains, because,
frankly, no other company in the market has the company-wide culture necessary
to produce the end-to-end quality that Apple does. It's far too soon to tell
if they can still innovate into new and unexpected markets, but they've only
released a handful of products since Jobs' death. But the truth remains:
whatever market they enter, they will dominate.

What do they need someone to come up with ideas? Shoot, I'll do it. How
desperate do you think they are? If I show up at 1 Infinite Loop claiming to
be channeling Steve Jobs, do you think they'd hire me?

Hogwash.

I wouldn't buy anytime soon either, but only because the stock price will
continue to fall as short-sighted investors keep believing things like this.

~~~
btilly
You are long on insults and short on specifics.

I guarantee you, as long as quality concerns remain a major motivating factor
for Apple buyers, Apple will develop competitors who attempt to deliver it as
well. They will never match Apple, but eventually will deliver good enough
quality for the buying market.

And it isn't new ideas that they need. It is new value propositions that
people will want to buy. And no, they aren't going to believe you if you show
up claiming to be able to generate them. So your inability to suddenly rise to
the top of Apple is not evidence against what I said.

~~~
Steko
Guys been dead one year and all we hear from people like you is that
innovation is dead at Apple because they haven't launched any new $50 billion
products in the last 4 quarters. Steve produced a handful of what you're
calling "new value propositions" in over a dozen years and most definitely had
his hands all over everything Apple has launched from his death to today.

Your claim that Apple probably has no new products in the pipeline is one the
most laughable things I've ever read on HN. Apple is not Microsoft or Google,
they don't demo a thousand shitty products five years early and hope some of
them catch fire.

Your claim that Apple's current product lines are all doomed is also silly and
disproved by inspection of their desktop and laptop business. Apple is an
innovation machine and everyone else is trying to hit a moving target.

Yes it was drivel and hogwash.

~~~
btilly
You say _people like you_ as if I was in bad company. Read point 5 of
<http://paulgraham.com/ambitious.html> to see someone who is generally
respected in these parts on the exact same topic.

Don't forget, we've seen this play before. Apple on top of the world, Steve
Jobs removed from the picture, a guy at the top with a history of execution
but not innovation. (OK, the current CEO's history is in a more relevant field
than Sculley's background at Pepsi...) The result was very much not pretty.

They are going nowhere for a while. They are clearly ahead of the market, and
they have a core constituency of fans. But I'm willing to bet money that in 10
years the luster is off, and in 20 they will be just another technology
company to most of the world.

------
GabrielF00
I don't see any material changes at Apple that can explain this stock slide.
Some people are saying that Apple is releasing only small iterations on
existing products rather than blockbuster new products, but for every brand
new product Apple has released since 1998 or so they've released far more
iterative improvements. Some people are pointing to new services that are
flawed, but Apple has released flawed services in the past (MobileMe?) and
that hasn't had much of an impact on customer demand.

Does Apple face stronger competition from Samsung and others? Yes, but any
reasonable investor should have factored in the fact that Apple's competitors
would do a decent job building comparable products.

It seems to me that Apple's potential for growth remains unchanged - even if
you don't factor in some new blockbuster product, in PCs they are growing at
the expense of other manufacturers and they still have a lot of room for
growth internationally. I don't see anything that's justified a 25% drop in
value.

------
Apocryphon
Two issues I have with the prevailing narrative of these discussions:

1\. The idea that Steve Jobs, while immensely important and influential, was
some sort of indispensable man. Yes, Sony faltered after Akio Morita passed,
and Disney after Walt was gone. But is history so certain to repeat? Are
corporations really impotent without the leadership of Randian ubermensch?

2\. The idea that Apple simply _had to_ create a new product this year. Not
every year prior to Jobs' passing had new Apple products appearing. Certainly
everyone is anxious to see what the company can produce in the post-Jobs era,
but is it really realistic to expect the next iProduct within a year after Tim
Cook became CEO?

------
jusben1369
The risk is that Apple becomes Microsoft. Microsoft has traded in the same $20
- $30 range for more than 5 years. Microsoft is still a cash cow. But there
are not enough new hits to propel the stock. Apple's not leaving any time soon
but until we see a new hit its staying flat to falling backward.

While I don't buy into the "Maps would have never happened with Steve!!" the
one thing that was undeniable was the man oversaw the iPod, the iPhone and the
iPad. Unbelievable. Cook et al shows no signs of opening an entire new market.
The iPhone is 47% of revenues today and now has several peers where even 2
years ago it had none. A lot of fund managers parked cash in Apple because it
was assured of a better return than interest rates. Now that's gone away etc.
So all of these things will add up and the stock will trade flat to down over
the next few years (unless they change the TV or computing device market again
etc)

~~~
adventured
It's worse than a risk, it's almost a guarantee.

MSFT was $26.x 14 years ago (even though this is all ignoring the ups & downs
between, it's still dramatic).

Megacap stocks are horrible investments on average if you're seeking good
returns, specifically because the law of big numbers cripples the ability for
any truly massive company to keep a high growth rate. Not to mention that
large companies typically begin paying their large profits out in dividends
(rather than using it toward growth), and Apple will do the same. Microsoft
has paid out the equivalent of half its current market cap in dividends over
the past ten years.

It'll be little surprise if Apple is $550 ten years from now, and that's a
good scenario given the history of big companies tumbling from the top of the
mountain.

Unlike Microsoft, Apple has no 'monopoly' in anything, and they have a vicious
annual upgrade cycle. If Apple screws up one version of the iPhone, their
stock would crash spectacularly, probably losing at least 1/2 of its value.
Microsoft botched a few versions of Windows, and took their time on releases,
but their desktop monopoly shielded them from the fallout.

Whether we're talking McDonalds, Boeing, Coca Cola, Walmart, Berkshire
Hathaway, Exxon, Intel, Microsoft, Cisco, HP, Dell, Chevron, etc. - eventually
the growth boom ends, and stock returns race toward sub 10% annually. Walmart
hasn't moved much in 12 years; McDonalds is now 'growing' at zero and their
stock will follow; Coke hasn't moved in 15 years; HP and Dell are disasters,
ditto Cisco's stock; Berkshire has returned about 3.x% annually over the last
14 years (with no dividend), radically below Buffett's historical record;
Boeing has returned around 2.x% annually over the last 16 years. It's a very
long list.

It's real simple in premise: you want Apple at $7, or $35, or $90, but not at
$500 or $700 when the future returns are likely to be mediocre. Specifically,
you want the next Apple, not the last one.

------
Alex3917
"Analysts say that Apple has had a string of misfortunes lately, ranging from
missed earnings estimates, management shakeups, missteps on mapping software,
supply chain problems, and increased pressure from competitors."

I think the bigger issue is that Apple has accumulated a ton of technical debt
recently by having a ridiculous number of products in the market. To keep the
plates spinning they've been forced to hire a massive number of new employees,
which in the long term at best limits their growth potential and at worst is
setting them up for a Microsoft-style lost decade.

~~~
melvinram
Compared to almost any other company near their size, they have a ridiculously
small number of products in the market.

------
sbuk
It's absolutely staggering that this article and commenters here have failed
to pick up on the fact that the markets are bearish at the moment and that
this is a post election market too.

~~~
megablast
Apple has fallen beyond markets, and it started before the election.

Not that it means a lot.

------
patrickgzill
The AAPL-watchers at ZeroHedge.com take the view that hedge funds are heavily
invested in AAPL and that if they leave the stock price will go down due to
heavy selling. Further an avalanche of selling could be set in motion if 1
hedge fund sells enough to cause other hedge funds to decide to sell as well.

See e.g. [http://www.zerohedge.com/news/2012-11-08/apple-enters-
gravti...](http://www.zerohedge.com/news/2012-11-08/apple-enters-
gravtitational-singularity-hedge-fund-hotel-evacuation-begins)

Note: VWAP means "volume weighted average price" and ES refers to contracts
that track the price of the S&P 500 : [http://www.cmegroup.com/trading/equity-
index/us-index/e-mini...](http://www.cmegroup.com/trading/equity-index/us-
index/e-mini-sandp500_contract_specifications.html)

------
itsmequinn
Apple's real or fictitious woes aside, if the stock closed up 2.06 to 527.68
on Friday, how is Friday's close the lowest Apple has been in 6 months?
Wouldn't that be Thursday's close of 525.62?

~~~
mertd
The original article does not mention closing price, and it was written on
Friday. Either they mean the sharp drop during the day on Friday or the
closing price on Thursday.

------
Causalien
What you are seeing. Is a reversal of sentiments from all front. Steve, is a
scary negotiator to go against, that's why apple got the deals it got.

If you are buying based on PE, good luck.

Yes I put my money where my mouth is. Sold AAPL, bought TSLA.

------
thecosas
Buy now :o)

~~~
gabhijit
AAPL is where RIMM was 4 yrs ago. Rest all is history!! :)

~~~
arrrg
I do not see them failing like RIM. They might well fail like Sony (i.e remain
largish but slowly fade into irrelevance). I can totally see that happening.

~~~
zdw
Or, like Microsoft? (flat stock for the last ~10 years)

~~~
arrrg
I’m not sure whether that’s a good comparison, but that could be down to
personal taste. Microsoft made tons of money by selling an extremely boring
product. That’s never something Apple did. Plus Apple sells hardware,
Microsoft software. They are fundamentally different companies.

I can see Apple having a stock like Microsoft (i.e. flat for a decade), I
can’t really see them being like Microsoft.

------
sudhirj
Well, then. Buy buy buy.

------
mkr-hn
Just going to leave this here: <http://news.ycombinator.com/item?id=3507420>

------
notdrunkatall
Growth at breakneck speeds can't continue forever, Law of Diminishing Returns
and all that. Jobs is dead, and the market is a little spooked by that. Pull
up a long-term chart of AAPL and note the trendline since '08. It is reverting
to that line, which is not particularly worrying. If it falls below that
trendline, it will become the next MSFT (in a stock sense). Actually, the
question is not whether AAPL will become the next MSFT, but when. If you're
looking for growth, I suggest looking elsewhere.

