Speechless

by,

Suzanne Coleman

Wow, Apple.  Wow everything.  What is going on here people?!  This stock market trading is insane.

First off, when you trade, you trade in pennies, not dollars, OK?  Geez, it’s like these people have no idea what they’re doing…

Yeah, let’s start with that.  I’m getting to be a broken record here, but, maybe before you buy or sell a stock you might want to GET A CLUE?  Since I own Apple, I’ll be focusing on that as a cornerstone for this conversation.

A good company’s stock doesn’t lose 30-40% of its value in a couple of weeks.  This isn’t Netflix or Amazon, the two stocks that continue to be super over-valued compared to their actual earnings, this is Apple, a proven stock with quickly growing earnings and a PE that is actually too LOW for its pre-drop price.

Now let’s play on people’s “reason” behind the recent decline, worries about the loss of income from sales in China.  Let’s say China literally falls off of the face of the earth, maybe the earth’s crust crumbles and the surface detaches and it just simply floats out to space.  Now, who knows, maybe they have cell service out there, I don’t know, but let’s just say, just for fun, that they don’t.  So if this happens, does Apple whither and die due to the loss of this entire market?  What do you think?

Yeah, you’re right, the answer is NO.

Would its growth suffer?  Yes, yes it would, but I must say, this is a ridiculous scenario because as far as I know, and yes I have personally checked this myself this morning, the earth’s crust under China is in fact, securely adhered to the globe.  So traders, you really don’t need to worry about China disappearing completely as a market today or any day in the next millennium or so.

So now, back to what most of us perceive to be reality.

China is in the predicted retraction phase, our world’s economies are almost all interconnected now, and those of you who didn’t realize this after our economy pulled back, well, I guess you’ll believe me now?  🙂  It’s all physics, the “ripple effect” created by the waves that we made earlier has reached China.  Recent published reports stated that their economy might only grow like 5-7% this year.  Wow, that is “terrible!”  Of course, it can get worse, they might actually stop growing.  Or even go into a recession like we recently did…  But they’re not there yet.  Their growth is decelerating (and has been for maybe 2-3 years).  During this period of time Apple has been consistently seeing INCREASED sales and profits coming from China.  So, maybe a little perspective will help stabilize this market?  I hope you’re paying attention people…  Maybe I need to be more blunt?  Apple will not collapse and die because of a contraction in China’s economy.  Yes, it’s possible they might not grow as quickly as they have been, but that’s expected in any new market, right?  Yes, right.

A little more perspective.  Apple continues to be in an expansion phase due to the overseas markets’ late adoption of its extremely popular cell phone products, and it continues to innovate, providing consumers products that they can’t live without.  This stock was fairly valued before this series of drops.  And now with a PE of 11- something, this high-growth stock which is backed by billions in cash, is a great bargain.  People who bought in today will be very happy they did, and hopefully very soon.

Compare this to Netflix, with a PE of around 200 recently (i.e., the price is way too high), which has had similar growth and management success in the last 2 years or so.  Their price is still flying high; I would have expected their price to drop way more than Apple, but logic doesn’t seem to be the reigning force in the market this year.

Apple deserves more stability than this people, let’s start trading with some respect.  12-month estimates average 146.88.  So that’s about 40% upside from the current price of $104.50.  Yes, people, that is VERY good.  Buy.

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Apple Stock, Looking Good

by,

Suzanne Coleman

 

I think this is a good time to buy Apple stock.  It’s down quite a bit now off it’s intra-week historical highs.  It reported record increased profits last quarter of over 40% vs. last year’s holiday quarter.  The current quarter might show stronger than expected sales as well due to the popularity of the newest iPhone versions around the world.  This is particularly true in China, and they just celebrated their new year’s holiday where a part of that celebration is that nice gifts are exchanged.  Because of this some analysts have said that they think iPhone sales may show a significant boost this current quarter.

The negative news in the last few days about patent lawsuits being brought against the company is not likely to have a significant impact on the value of the company.  The judgement just laid down in Texas in favor of Smartflash (the company that brought the suit) is being challenged by Apple, and the next legal battle will take place in another court, in another area.  The original suit was tried in same area of Texas whereSmartflash is based.  It has been reported by others that this same retrial method has been used in the past in similar suits brought by Smartflash against other technology giants, and those suits ended up with verdicts that were much more favorable for the sued company after the appeal.  And while $500 million or so sounds like a lot of money, it is less than one percent of Apple’s annual revenue of about $199 billion, or about 8% of their annual profit of about $70 billion.

The new suit brought by Ericsson is a negotiating tactic (per the press).  Each of Apple and Ericsson have brought a suit against the other for the same reasons in this situation, contract term renegotiations.  In other words, they want better terms for themselves and they are playing a game of chicken suit.  Lawsuits are essentially a part of big business, at least they have been as long as I have been following business (almost 20 years).  In most cases, these suits do not result in any detrimental outcomes to either party.

The Apple Watch is looking more and more like it will be a hit, though no one can truly predict that.  Competing businesses who also make techy watches (like Pebble) have already had millions of orders for theirs.  Those watches are not as highly functioning as Apple’s and one might say that they are not as “cool” or “trendy.”  Plus, big bankers like Morgan Stanley are predicting big sales in the Apple Watch this year.  So that is another plus for the stock.

There are some people writing about how the NASDAQ’s lifetime high is “bad” and “dangerous.”  What did they think, that it would never grow?  I just don’t get it…  To me it seems more like people who are trying to manipulate the market to get the outcomes they want so that they can get a point to buy in at a lower price than the current one, and then sell it later when it rebounds.  You see this a lot with people who write about the market, putting out “news” headlines that are overly strongly worded to give the reader a negative or positive sense of urgency, but in reality, in most cases, it isn’t even news at all.  People still react to it though, to some degree.  Maybe if everyone learned not to, there would be more stability in the market.

So to present the other side of the argument.  Could Apple plummet?  Yes, it has happened before.  Could the market plummet?  Yes, especially if everyone starts panic selling based on unreasonable fears.  So, let’s not do that, ok? 😉

Apple is very well-valued with a low PE, especially for a company showing continued good growth.  See my other article on PE and “reasonability” here:

https://sliceiconic.com/2015/01/27/reasonability/

If there is one thing I have learned, it is that the stock market is both predictable, and unpredictable.  Unfortunately, that’s the way it goes.  As some have told me, it is like gambling, and I’ve come to realize these days that they are right.

 

NOTE:  I own shares of Apple stock.

 

 

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