Apple - Time to buy?
Time to buy? Did a very simple back of the envelope analysis, seems undervalued given noise.
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Perhaps, but not now. Market volatility is crazy at the moment. The VIX is up 5.34%.
There's also another problem - monetary tightening by the Federal Reserve.
The FR raising rates in September is only part of the problem. Continuous rate hikes are also something to consider.
Apple watch demand is poor, smartphone sales overtaken by Android. It's not a nice scene.
My sentiment is to lay back from equities in general. I hate being in the path of volatility.
Gus.
Apple has been undervalued for years. The problem is more a mental ceiling than an actual fundamentals ceiling.
Historically, Apple has dipped following their new product presentations and then surged once the products came to market.
So in a very simplistic view, yes buy it^^^
Despite the vigour in language, this is very much correct.
Fundamentals present a playing field for share price. Thereafter, it is all about systematic information and its interpretation into the price. However, in the long-run share prices may converge to a thin band around fundamental prices.
You'll have a better chance using fundamentals in the long run. With a short horizon, you may be struck with a heart attack every so often.
Clearly undervalued based on fundamentals.
Problem is, why would you invest in Apple, the company with the highest market cap in the world? It's currently worth $630 billion right now. So how much value does it have to create for you to have 10% capital appreciation? $63 billion - which is like 1.5 times the market cap of NFLX.
If you have a long term investment horizon, look at AMZN, FB, PYPL or some high growth companies with rooms to run. For example, AMZN have to triple its value to get the current value of Apple right now. PYPL is worth $42 billion, or 1/4 of Visa's market cap. So if you are patient, you can triple or quadruple your money with these stocks. Not AAPL thou.
Amazon, netflix at triple digit p/e's, when will it pop?
on a side note - been loading up on apple, bless you mr market
Technically yes AAPL is working off a larger base which mathematically can make it more difficult to deliver outsized growth rates but that's not the issue here. You are missing fundamentals. Yes, AAPL has a market cap of ~$640B USD compared to NFLX's ~$42B USD. However over the trailing twelve months (granted this could be argued to be towards the high end of cycle earnings but it should be the same situation for most similar names) AAPL has generated $69B in free cash flow. Let me say that again. $69 BILLION in FREE CASH FLOW. NFLX generated negative $462 million in free cash flow over the same period. AAPL's free cash flow generation alone is bigger than NFLX. And let's not forget that with the amount of cash AAPL has (granted much of it is offshore), AAPL could buy a few NFLXs.
Why would you want to buy Apple when that Alibaba company is killing it returns-wise?
Oh wait...
It trades at 8x free cash flow, and a few weeks back during the "panic" for a day or two it was closer to 6x. It's a very low multiple no matter how you cut it. This assumes no tax discounting of cash assets in calculating the numerator, and also the free cash flow number being thrown around will include cash generated at foreign tax rates, affecting the denominator. So depending on your view the "real" multiple could be closer to 9-10x at the moment.
It's all about evaluating how good of a business there is behind that free cash flow generation. At the moment it's a damn good business and the brand is incredibly strong. But for obvious reasons people have trouble paying a high multiple for what is close to a one product company in a relatively mature product category. That said the sub-$100 level / 6x FCF multiple range that was reached a few weeks ago was pretty crazy IMO.
AAPL trades as though it will throw off $50B in FCF forever, even at optically low multiples.
well they are going into electric self-driving cars...so I expect $100Bn in FCF forever, duh ;-)
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