ISM/PE Compression

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    Posted: 25 October 2011 01:35 AM #16

    Mav - 25 October 2011 03:41 AM
    johnG - 25 October 2011 03:19 AM
    Mace - 25 October 2011 01:00 AM

    snip….........
    c.  On-going deleveraging since financial crisis in 2008.

    We’ve only seen the first act in that play. There’s a LOT more to come and it AIN’T going to be pretty. I’ll be tickled pink if aapl can maintain a low double trailing PE next year.

      cheers to the longs
        JohnG

    Seriously johnG, just get out now!  A P/E of 9 means a share price of 405 even if Apple can make $45 in earnings by the end of the September 2012 quarter.

    I don’t begrudge you for being bearish - I mean a wounded bull - but you’re giving off all sorts of cognitive dissonance here by still being invested in AAPL now.  A P/E drop below 10 within 12 months means sell AAPL, right now.

    Macro issues driving aapl to single digits would imply an investment in lead might be appropriate.  :oh: 

    Macro issues notwithstanding, I have a fairly bullish outlook for Apple/aapl for the next year. My Apple/aapl model calls for a trailing PE of ~12 and ttm earnings (2012) of ~$43. That’s $516/share which is a big enough carrot to keep me in the game even when I expect the macro scene to be in the crapper. A trailing PE of ~12 would be AWEFUL for aapl but might look golden compared to other equities/commodities this time next year. Aapl could be better-worse in a year but those are my current #‘s based on what I perceive to be a deteriorating macro scene. 

      cheers to the longs
        JohnG

         
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    Posted: 25 October 2011 02:30 AM #17

    You can’t be fairly bullish AND tickled pink if AAPL keeps it P/E above 10 at the same time, johnG.  Seriously, it isn’t “healthy.”  You have to make your choice and take a consistent stand.

    Not trying to start a fight or provoke you in any way, but Investing/Trading 101 is all about assessing the strength of your conviction.  A projected P/E of 12 (possible) and “it’s highly unlikely AAPL can keep a P/E of over 10” are simply not compatible concepts.

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  • Posted: 31 October 2011 08:36 PM #18

    I think AAPL is on the cusp of an extended period of ISM EXPANSION.

    Think about it: AAPL’s high ISM for fiscal Q4/2011 was 16.89.  Now consider how much overhang has been removed with SJ’s unwanted passing.  Think also what SIRI portends for the future, with it being advanced into the iPad and Mac lines (and potentially television).  Think of how iCloud is going to glue everything together.

    We’re talking about increasing revenue growth rates (yeah, even from current levels) and much greater market share.  Just look at Apple’s market share in computers, handsets, and tablets (as a percentage of laptop market).  Apple does not require growth in the market place to dramatically increase units sold, yet, has created products that are changing the nature of consumer desires.  What was the market for digital music players before the iPod?  What was the market for smart phones before the iPhone?.  What was the market for “tablets” before the iPad?  How has the market for ‘netbooks’ fared since the iPad?  How has the market for Wintel laptops fared since the MacBook Air?

    We’re talking about the collapse (in terms of effective competitiveness and share) of the Blackberry and Android platforms (Symbian and webOS have already disappeared).  MSFT’s WinMobile 8 may become a genuine player, but it will be relegated to second place (at best).  Desktop Wintel share is going to further decline as iPad (not tablets), and MacBook Air, take ever greater share of mobile computing.

    I can easily envision ISM expansion of 10% (increase of 1.69 from FQ4/2011 results), and that means (based on current TTM) another $46 in AAPL valuation.  Increase ISM another 10% (to 20.44) after April results and the incremental increase in AAPL valuation (based on ISM expansion) adds another $63.00.

    In nine months, AAPL could add $100 on top of how WS valued AAPL during FQ4/2011, based on ISM expansion alone.

    [ Edited: 31 October 2011 08:39 PM by Gregg Thurman ]

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    Posted: 31 October 2011 09:52 PM #19

    Gregg Thurman - 31 October 2011 11:36 PM

    I think AAPL is on the cusp of an extended period of ISM EXPANSION.

    Think about it: AAPL’s high ISM for fiscal Q4/2011 was 16.89.  Now consider how much overhang has been removed with SJ’s unwanted passing.  Think also what SIRI portends for the future, with it being advanced into the iPad and Mac lines (and potentially television).  Think of how iCloud is going to glue everything together.

    We’re talking about increasing revenue growth rates (yeah, even from current levels) and much greater market share.  Just look at Apple’s market share in computers, handsets, and tablets (as a percentage of laptop market).  Apple does not require growth in the market place to dramatically increase units sold, yet, has created products that are changing the nature of consumer desires.  What was the market for digital music players before the iPod?  What was the market for smart phones before the iPhone?.  What was the market for “tablets” before the iPad?  How has the market for ‘netbooks’ fared since the iPad?  How has the market for Wintel laptops fared since the MacBook Air?

    We’re talking about the collapse (in terms of effective competitiveness and share) of the Blackberry and Android platforms (Symbian and webOS have already disappeared).  MSFT’s WinMobile 8 may become a genuine player, but it will be relegated to second place (at best).  Desktop Wintel share is going to further decline as iPad (not tablets), and MacBook Air, take ever greater share of mobile computing.

    I can easily envision ISM expansion of 10% (increase of 1.69 from FQ4/2011 results), and that means (based on current TTM) another $46 in AAPL valuation.  Increase ISM another 10% (to 20.44) after April results and the incremental increase in AAPL valuation (based on ISM expansion) adds another $63.00.

    In nine months, AAPL could add $100 on top of how WS valued AAPL during FQ4/2011, based on ISM expansion alone.

    I hope your right, but using the reasoning that revenue/earnings/marketshare growth leads to ISM expansion hasnt proved to be correct for AAPL in recent times (if anything, the opposite has happened) - why do you think it will be any different over the next 12 months? Plus Apple missed analysts expectations buy a lot last earnings, not a good primer for ISM expansion by any means.

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  • Posted: 01 November 2011 03:03 AM #20

    iOSWeekly - 01 November 2011 12:52 AM

    I hope your right, but using the reasoning that revenue/earnings/marketshare growth leads to ISM expansion hasnt proved to be correct for AAPL in recent times (if anything, the opposite has happened) - why do you think it will be any different over the next 12 months? Plus Apple missed analysts expectations buy a lot last earnings, not a good primer for ISM expansion by any means.

    To hell with analyst’s expectations, they don’t buy equities.  Institutions, on the other hand, do.  I’ve been arguing for several months that Apple has missed its internal estimates, and by extension institutional estimates, since FQ4/2010 (excepting FQ3/2011).  That’s four out of five quarters.  The malaise of the past year is a reflection of those misses.

    Average high ISM for fiscal 2010 = 23.99
    Average high ISM for fiscal 2011 = 19.58

    That’s an 18% reduction in sentiment, and did not come from investor selling, it came from the LACK OF Institutional buying.

    Fiscal 2010 Daily Volume Average = 21,906,888
    Fiscal 2011 Daily Volume Average = 17,465,872

    That’s a 20% reduction in Daily Volume Average.

    I think all of that is behind us, because iPad unit sales now have history (short and weak as it is) to support future assumptions and collar overly optimistic expectations, and because Apple has corrected its iPad screen supply problems.

    Management says expect higher costs/lower earnings every time there is a major product transition.  After Q4/2011 results, I believe WS (and amateurs alike), will pay more attention to future statements on that subject.  Its only logical that as Apple’s product volume increases, it will only get more difficult to transition production lines from old to new.

    As expectations are moderated, with Apple increasing capacity beyond JIT, Apple will return to blowing past them, and THAT will drive ISM higher.

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  • Posted: 12 March 2012 12:22 PM #21

    We are in ISM expansion territory.  This first in about a year.

    This morning AAPL’s ISM hit 15.701.  The high ISM for the December quarter was 15.584.  The next ISM milestone is 16.892 (September quarter high).

    I believe AAPL will surpass the next ISM milestone prior to April earnings.  The milestone I’m looking forward to is the March quarter 2011 intraday high 20.37.  It’s possible that we achieve that milestone prior to April earnings, but I’m not expecting it.  Certainly before January 2013 earnings, though.  ttm $60.00 X 20.37 = ~$1,200.

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    Posted: 12 March 2012 08:37 PM #22

    Gregg Thurman - 12 March 2012 03:22 PM

    We are in ISM expansion territory.  This first in about a year.

    This morning AAPL’s ISM hit 15.701.  The high ISM for the December quarter was 15.584.  The next ISM milestone is 16.892 (September quarter high).

    I believe AAPL will surpass the next ISM milestone prior to April earnings.  The milestone I’m looking forward to is the March quarter 2011 intraday high 20.37.  It’s possible that we achieve that milestone prior to April earnings, but I’m not expecting it.  Certainly before January 2013 earnings, though.  ttm $60.00 X 20.37 = ~$1,200.

    I like that target - I’ll be able to quit my job a year early.

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    Posted: 12 March 2012 10:58 PM #23

    Gregg, I’ll change my avatar to a guy eating his hat if we hit $1200 before the fiscal Q1 2013 earnings release.

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    Posted: 12 March 2012 11:26 PM #24

    Gregg,

    I like the way you think.

    I attribute the rising multiple to

    1) investors taking the measure of Tim Cook, and liking his shareholder- friendly noises
    2) growing recognition of iPad continued dominance of the exploding tablet market
    3) iPhone ‘s continued tear.


    Other thoughts?

    In any case, 20 times earns is hardly worth eating your hat over, Mav.  CSCO, MSFT, topped out at, what, 40 to 50 times earnings.?

    Heck, the Mac business alone, growing at 20 percent CAGR, should command 20 times earnings.!

    Tim said it best ....“this is only the beginning”. We have so much room for earnings expansion AND multiple expansion it is , to use another Tim-ism, mind boggling.

    552 is cheap cheap cheap.

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    Posted: 12 March 2012 11:30 PM #25

    Trust me, the world isn’t ready for this.  It’s not that I don’t think the valuation is justifiable.  I bet a lot of us here think AAPL should be trading at 800+ right now, if not higher. 

    I think AAPL will “earn it” the hard way.  And there’s nothing wrong with a multiple under 20 with Apple still on a revenue and earnings tear.  There’s a treasure trove of opportunities for those willing to take the risk even under the more pessimistic scenarios.

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    Posted: 13 March 2012 08:54 AM #26

    Great point, Mav.

    it is a paradox:
    The world’s ignorance is what creates our opportunities—on a silver (platinum?) platter.

    Put another way, if everyone “got” AAPL, it would be fairly valued.

    Maybe it is time to shut up about our favorite fruit—at least until we are fully loaded!

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