Apple became the first publicly traded company valued at $3 trillion on Monday, touching the historic milestone briefly after a weeks-long rally in its stock price, but Bloomberg Opinion‘s Tae Kim thinks the milestone is “a breathtaking figure that’s hard to justify.”
Apple Park in Cupertino, California
Tae Kim for Bloomberg Opinion:
The climb has been striking. Since mid-November, as major stock indexes have stayed roughly flat, Apple shares have risen more than 20%, bringing the company’s value to a once hard-to-fathom $3 trillion, the first time a publicly traded company has reached that lofty milestone. To put it in perspective, that’s more than the gross domestic product of most countries.
Technovanguard Take: Yes, it is. And Apple runs as a very profitable enterprise, unlike most countries, many of which run deeply in the red. Apple can’t just print up fake money. (Notice we didn’t say free money. Nothing is free.) Apple makes real money.
Apple is especially vulnerable to one of the biggest macroeconomic worries for 2022: inflation. Unlike software and internet firms, the company’s main business involves selling physical hardware products. That means if wages, shipping and raw material expenses continue to climb, Apple’s profitability will be crimped.
Technovanguard Take: Because Apple, and Apple alone, can’t raise prices while everybody else can try to keep pace with uncontrolled inflation due to unsound monetary policies and wasteful overspending, is an illogical, laughable argument.
Beyond the external economic factors, it’s doubtful Apple’s prospects have improved dramatically to justify the latest rally. Remember that in late October, the technology giant missed analysts’ sales expectations for the three months ended in September, and Chief Executive Officer Tim Cook cautioned chip shortages would get worse in the holiday quarter.
Technovanguard Take: Apple will post an all-time record quarterly revenue record later this month. Last holiday quarter, Apple posted the current all-time record revenue of $111.4 billion, generating all-time record operating cash flow of $38.8 billion. In three months.
The latest reports indicate this year doesn’t look much better. Late November at an investor conference, the head of AT&T Inc.’s wireless business said he expects customer growth won’t be as strong in 2022. That doesn’t bode well for Apple.
Technovanguard Take: “Won’t be as strong.” So, in other words, it’ll be strong growth for AT&T, one of Apple’s hundreds of carriers worldwide, just not as strong as during the height of the COVID hysteria.
FYI, here’s Tae Kim from over a year ago (Bloomberg Opinion, December 30, 2020):
Apple’s latest lineup of iPhones needs to materially exceed sales expectations to justify a price-to-earnings ratio valuation roughly double its past history.
Technovanguard Take: Apple’s stock price when Kim, like a broken record, last year lamented Apple’s valuation stood at $125.88. Apple is currently trading at $182.06. If you invested in AAPL right after reading Kim’s attempt to talk down the stock a year ago, you’d be up $56.18 per share.
When Tae Kim talks, smart people listen – and then do the opposite.
Apple isn’t cheap. The stock is trading at around 30 times 2022 fiscal year’s earnings estimates, which is more than 50% above its five-year historical average…
Technovanguard Take: Five years ago, Apple was regarded (wrongly) by Wall St. as “the iPhone company,” a hardware maker. Today, Apple’s Services business alone is worth significantly more than Tesla which, by the way, is trading at 391.83 times 2022 fiscal year’s earnings estimates (not a typo). Now, there’s a valuation that’s “hard to justify.”
Tae Kim grasps at straws, yet finds himself empty-handed, unable to cobble together any foundation for his baseless conceit.
Apple is significantly undervalued. Apple is cheap.
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