Apple is in the tech group with cohorts of CRM, WDAY, RHT, SWKS, NFLX, and AMZN. Take a look at the valuations of this group. The PE's range from infinity (negative earnings in the denominator) on down to the 50. The price to sales, except for Amazon, range from 8 to 20. The first time a company with a valuation that extreme misses by a penny, or disappoints in any way, it comes crashing back down. Savvy investors are not going to keep pouring money into this group and upping the ante on the amount of risk they're going to take during the next market downturn or disappointment in earnings.
The money has to go somewhere, and that "somewhere" is very likely to be Apple, whose growth rate is above the market and PE below it. This crazy idea that "Apple is a one-trick pony whose smartphone lead will be diminished by competition is being debunked. The Iphone demand is sustainable, and there is every reason to believe that Apple will increase its dominance in coming quarters. Android is the dinosaur here.
Then there is Apple's close alliances with Salesforce (CRM) and IBM. Whose smartphones and tablets are those market leaders going to be pushing their employees and customers to use?
Apple critics have exhausted their credibility in dissing the watch before it was even on sale. Now it appears to be yet another blockbuster product.
These ideas are percolating into the market. Given Apple's low valuation relative to is peers, money managers understand that Apple is one of the few compelling values left in the market.
I concur. I've been using Schwab for thirty years. Have turned over tens of millions in trades during that time and have never had complaints. Unless a stock or option is thinly traded it doesn't make sense to use limit orders to me either. I suppose some people use them because they're doing other things and can't keep a close enough eye on the market to make their trades in real time. Bu you're opening yourself up execution problems with limit orders. Market orders are always executed immediately. Limit orders can bunch up together in queue and not be executed at the price you expect.
I haven't heard CNBC bash Apple lately. I only listen to them from 6:00 to 7:00 in the morning (Joe Kernan, Becky Quick, and Andrew Ross-Sorkin), then for a few minutes around lunch, and sometimes to the first five minutes of Jim Cramer's show. They have mentioned Apple a few times during those intervals I've watched, and it's been decent coverage.
I know there are a few perennial Apple skeptics on CNBC, but I turn those people off whenever they pop up. I don't have time to watch idiots spout stupid opinions on TV, so I don't watch them.
Thanks for the heads up! Kudos on being one of the first human beings on Planet Earth to own an Apple Watch. Glad to hear it's met, and apparently exceeded, your expectations!
Apple is undervalued for a couple reasons. First, it is so big that it can never be acquired by another company. Thus, there is no potential takeover premium to lift the stock.
Secondly, Wall Street doesn't like Apple, because Apple doesn't need Wall Street. Apple is self-financing. They are never going to call on Goldman Sachs to underwrite a secondary offering (thereby scamming 8% commission) or see advice (i.e. pay a huge commission) to receive advice on mergers and acquisitions. Apple can handle those things with its in-house people.
Wall Street firms therefore don't like Apple, or are at best indifferent to it. They are going to bad-mouth it at all opportunities. It really angers them when retail investors buy Apple stock. "The rubes are buying Apple without our permission. Why, we'll show THEM who's boss!"
That guy doesn't trade. He's a laid off former Apple employee pretending to be somebody important. Anonymous message boards attract those kinds of people.
Apple has already give ups 15% this year, and will probably make it another 10% or better before year end. Anybody who can't be satisfied with 25% on a low-risk stock is too impatient to be in stocks. Try options for a higher risk / reward profile.
Your take is very perceptive. The market is sick at the moment. The failure of Apple to break out to new highs after earnings, and then drift lower at the close of each and every day is symptomatic of a market with a hangover from the huge gains of the last six years. So, the market will meander a while. I think Apple will start to pick up in the next two quarters when sustainability of earnings is demonstrated. IMO it would be a mistake to get out of Apple now and "chase heat" in the speculative tech stocks like CRM, which are selling at 12 times REVENUES. The "hot stuff" will be obliterated if the market takes a big dump. Apple might go down 10% but not more, since it is so undervalued relative to its earnings growth.
Apple's rise above $130 has been delayed by a weak market, but weak markets eventually heal themselves. Apple will reach its fair value in time.
I bought by first batch last October between $98 and $103. Sold about 15% of that during the retracement down to $29. Buying again in the $125's. A good place to reload and wait for next earnings.
That will take 10% of the float off the market this year and another 10% next. Every trading day Apple will be absorbing over $300 million of its stock. That's $1.5 billion going off the market every week. The growth is 28% and the PE is less than 17. Feel free to bet against all that if you like.
IMO there were a couple of surprises:
1. Iphone sales beat estimates by 6%
2. Profits beat by a similar percentage, so gross profit is holding strong.
3. Buy backs exceeded expectations by 20%.
4. If you take Tim Cook's words literally, the watch is exceeding expectations. Some on the Street said they didn't like the TONE of Cook's words, but would you bet on Tim Cook or a no-name Wall Street analyst?
5. Cook said that only 20% of customers have upgraded to Iphone 6's and there's room to keep growing 28% YOY for the rest of the year.
6. Cook hinted at Apple TV coming on line this year.
So, overall, I think it's fair to say that they surprised in exceeding expectations.
My 2016 Leaps @ $100 are doing fine, thank you very little. Bought 'em in the 10's through 12's last Otober, and have sold off 15% of the position in the 20's and 30's, for 100% to 160% profit. Holding the other 85% until expiration.
The fact that Apple is in a consistent uptrend is the reason you CAN day trade it successfully. If your trade isn't profitable by the end of the day, you have assurance that it will be profitable in a week or a month. Trading the general trend is the basis for success in day trading. You can't successfully day trade a stock that doesn't have a trend. Volatility alone doesn't cut it.
Since we're in a bull market, there is the usual pack of "hot" stocks like twitter, redhat, workday, salesforce, and the biotechs. These stocks ratchet up pretty fast, then come crashing down the minute they "miss" by a penny.
You almost never have to worry about Apple crashing 20%. in one day like Twitter did. It's undervalued relative to the market, and is growing faster than the market. You can almost always buy the dips and wait a few weeks to have a solid profit..
Once Apple does get to $250 we won't be able to make those claims. It will be just another frothy, fairly valued, speculative tech stock. If it misses from that level, then it will crash 20% in one day. But we're a couple years away from that point. And if Apple keeps buying back stock in massive quantities, it may have taken enough shares off the market that even $250 won't be frothy. At least for the next couple years Apple is the faithful soldier in your portfolio.
Value investors should never be in Apple in the first place. I know the mindset of these people, and they are feeble-minded. They spend their time buying junk stocks that are headed for ultimate bankruptcy. I've never met any "value investor" that accomplished anything other than to lose value of his/her portfolio. If you want to know how these people operate, then go to any junk stock and you will see them flocking like buzzards on carrion. The carrion never comes back to life, and the buzzards never get pretty by eating it.
I think the people who want to sell / short Apple got out today. So did any "value investors" if there ever were any in Apple. Good riddance.
Another thing to remember about Apple is that it is a low-risk company. Anybody who thinks Apple's growth is tepid should go hitch their fortunes to biotech or Twitter, which is down 20% in one day. Or look at what happened to Tesla. That's what you get with the go-go momentum stocks that the crowd follows. You get a year or two of upside followed by a crash that takes you back to ground zero.
Apple is a little slower to appreciate, but a lot steadier when the market hits an air pocket.
I own over 200 January 2016 calls that I bought for $10 to $12 last October. I'm not in any hurry to sell mine. The Man will have to pay top dollar to get mine, or he will have to cough up some Apple stock to sell me at $100.
I wasn't exaggerating. In fact, the earnings were a penny HIGHER than I thought. It never pays to underestimate Apple.
That's my expectation. Also, Imac sales will be up 25% YOY. Ipad sales will be down 20%, but will be forecast up from here on out as the Ipad inflitrates into IBM and Salesforce via their partnerships with Apple.
Apple Watch sales will project 20mm for the first year. And Apple Pay will start to show measurable revenues. The Apple TV will be mentioned as a new product line.
Good stuff all, and very likely sufficient to move the stock into the $140 / $150 trading range.