Apple = Bubble? You decide.

[RichardAWilson]

http://chart.finance.yahoo.com/z?s=AAPL&t=5y&q=&l=&z=l&a=v&p=s&lang=en-US&region=US

Apple reported sales of over $65 billion in 2010 vs $32.5 billion in 2008.

In the fields of economics and business, we learn that such stellar growth can't be sustained forever.

There is, after all, limited demand for computers, software and mobile phones. The same can be said for media.

Consumers will still have to spend cash on food, housing, automobiles and gasoline.

In an economy with 2% annualized growth, Apple's growth will be restricted in the longer term.

Apple's capitalization has surpassed $390 billion.

Is Apple worth more than the world's leading oil and natural gas supplier (I.e. Exxon Mobil)? Technology is volatile. Any number of competitors could design, manufacture and sell a new cutting edge gadget that could ruin Apple. (It has happened before and it will happen again and again). No business can claim to be immune from innovation.

[RGacky3]

Its not a bubble, if a stock is over priced it does'nt make it a bubble, a bubble is when you securitize and speculate on something, the price of apple stock is working the way it should, people are pricing it as the stock market is usually priced, its not like the housing bubble where you had mortgages being packaged and sold to banks who packaged and sold them to hedge funds who insured them and sold them to pensions, thus creating tons of false incentives and tons of hidden risk, this is just a potentially overpriced stock.

Is Apple overpriced? Maybe (short it :)), but thats not a bubble, the stock market, as I've always said, is fictitous capital and perception and is much more important than fundementals.

I still think Gold is in a bubble however, because its not acting the way gold usually acts.

[Judicator]

Is Apple overpriced? Maybe (short it :)), but thats not a bubble, the stock market, as I've always said, is fictitous capital and perception and is much more important than fundementals.

Please go ahead and give me some of your "fictitious" capital. Check, money order, or Apple stock is fine! :lol:

[RGacky3]

Please go ahead and give me some of your "fictitious" capital.

If you've never read Marx you'd have no idea what that refers to or what it means, and you obviously hav'nt.

[RGacky3]

I actually don't even think Apple overpriced that much, its earnings look really good, its P/E ratio is'nt out of control.

Its price follows the fundementals pretty well, the reason its gone up so much is because its done really well.

Now if your saying that it might drop overtime due to economic issues, I agree, it being cyclical consumer goods it could easily find it self at excess capacity and lacking demand.

That being said their major growth was during the recession, where excess capacity and a demand shortage effected many companies but apple did fine, so I'm not so sure.

[Judicator]

If you've never read Marx you'd have no idea what that refers to or what it means, and you obviously hav'nt.

Who said you were using fictitious capital in the Marxist-jargon sense, as opposed to capital that's literally fictitious?

[JFB.anon]

I think it is, just like Nintendo after its blockbuster Wii. People don't even use their wiis nowadays, and their new overpriced piece of ham (the 3DS) has dropped its stock price to its lowest in a decade. It is a bubble, in my opinion.

[RGacky3]

Who said you were using fictitious capital in the Marxist-jargon sense, as opposed to capital that's literally fictitious?

Anyone that's aware of Marx.

[Ocean Seal]

Its very strange how Richard A. Wison takes the time to post stock information on a communist forum...

[RGacky3]

Why not?

[RichardAWilson]

Well, Apple's common shares have crashed in the after-market. For the reasons I cited, Apple missed earnings expectations.


http://www.bloomberg.com/news/2011-10-18/u-s-stock-futures-drop-after-apple-s-quarterly-earnings-euro-erases-gain.html?cmpid=yhoo

[RichardAWilson]

I think Apple can be classified as a bubble. After all, we did have a NASDAQ Internet Bubble in 2000.

A financial bubble occurs when the price of a certain holding (I.e. Stocks, bonds, housing and commodities) has exceeded the holding's value.

In Apple's case, it (the bubble) was that investors and speculators were pricing the firm to be worth more than Exxon Mobil.

[Robert]

Well, Apple shares have crashed in the after-market. It would seem that, as I had figured, the firm missed earnings expectations. :laugh:Well, congratulations, I guess, but do you see some political significance to a single large cap tech stock dropping less than 8% in value? This is a daily occurrence.

We are all mystified by your fascination with this story, Richard. What's going on? did you short Apple and make a few bucks?

The entire Nasdaq dropped 70% in 2000.

And the link you gave shows the stock down less than 7% in after hours trading. Bank of America went up 10% today.

Color me baffled.

[RichardAWilson]

No, I was just showing another case of animal spirits running wild.

I wish I had shorted the stock. I was figuring it'd be a little longer before this happened.

The chart at the top is a mirror image of the NASDAQ before it crashed.

I think we're seeing the beginnings of Tech Bubble 2.0.

I guess that'd be the political significance =)

[RichardAWilson]

Is Linked In, the professional's social networking site, worth $8.5 billion?

(I.e. Is a web business with little sales and close to no earnings worth more than Family Dollar?)

Is Price Line . Com worth $25 billion? (I.e. more than Family Dollar and Dollar Tree combined)

If this isn't the beginning of Tech Bubble 2.0, I don't what is.

[Robert]

Well, no one can say that Apple won't drop 25% in value over the next 12 months, if that's what you call a bubble, but the dot com crash involved many small companies that had no earnings or products or profits at all. They burned through their cash and went bust because they had no underlying product to sell and stay afloat.

Apple is a whole 'nuther beast. 26 billion in profit based on 108 billion in revenue for 2011.

To be sure, I wouldn't buy LinkedIn or PriceLine or Expedia type companies anyway, at any price, so if you say they're overpriced, that's fine by me.

[RichardAWilson]

26 billion in profit based on 108 billion in revenue for 2011.

As I've said, there are obvious limitations to continued growth. Apple's $390 billion "value" is based on the perception of unsustainable growth. How much did the I-Phone contribute to the "bottom line?" Apple's reliance on a handful of core innovations is unreliable in the long-term.

I'd be betting on Nokia's turnaround and Research in Motion before I'd think Apple was worth $390 billion.

(Netflix is another one. I'd compare Netflix to the E-Bay of this decade.)

[RGacky3]

Well, Apple's common shares have crashed in the after-market. For the reasons I cited, Apple missed earnings expectations.


Well shit you were right :). Short it now.


(Netflix is another one. I'd compare Netflix to the E-Bay of this decade.)

I'm with you there, Netflix is even weaker than E-Bay imo, but they already burst.

[RichardAWilson]

Well shit you were right.

Well, it had to happen eventually. Apple is a textbook case of how a bubble cycle works. The firm begins reporting stellar profits, which leads to higher and higher expectations. The firm continues beating those expectations, pushing the stock price and expectations even higher. Sooner or later, the firm is unable to meet those ultra-high expectations (for the reasons I cited above) and the stock price is forced to crash.

http://chartporn.org/wp-content/uploads/2009/03/image13.png