by,
Suzanne Coleman
I think the best next move is for Apple to buy Netflix. Why not? What do you think? Maybe we’ll find out more tomorrow…
Speechless
August 24, 2015 by Leave a Comment
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.
Apple’s future domination: Apple Watch, AppleBank, and ApplePlay
March 16, 2015 by 1 Comment
by,
Suzanne Coleman, MD
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UPDATE:
Interestingly, about 9 hours after I posted this original analysis to “The Slice Iconic,” “The Wall Street Journal” published an article claiming that sources say that Apple is working on a TV service. They give specific details but it appears to be unofficial information at this point. Many other news outlets have now referred to the WSJ’s article.
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When I first heard of the Apple Watch I didn’t think it was going to be of any value so I didn’t even include it in my projections for the company’s success. Now that I’ve seen it and understand it better, I think it will be the next iPod. But they will need to make it useable without the iPhone first. Then adoption will be widespread. Will this lead to the end of the iPhone? No, I don’t think so. I think that the aWatch will have 3 main adopters: business people, teens, and cool people. Other than that, it will depend on the individual’s needs and tastes. The iPod blew up the market in teens and young adults, and the rest is history. The iPhone came out of the iPod and now the aWatch is coming out of the iPhone.
I see the aWatch being used as a portable device to make and receive calls, send and receive texts, provide reminders, follow stocks and alerts, for travel information, paying your bill, oh, and as a watch. And it plays music too. According to gizmodo.com, it can do this without the iPhone. It uses wireless technology to send the music to your bluetooth-enabled earphones/headset. I’m guessing it can also play music over the included speaker.
The iPhone will be the new iPad as device sizes contract for portability. If you need something bigger, the new Mac can be used for typing and photoshop work etc. while at work, on the train, plane what have you. It’s an Apple World future.
Outside of devices which dominate the world of information and communication, I see the following. Apple Pay is going to be huge. Well, really, it already is. I can’t recall ever having seen something new adopted so quickly into a market. Again I ask, how are they monetizing this product? I don’t know their strategy, not being privy to it, but I can theorize.
What if Apple eventually opens up the new AppleBank? Apple already has users using its “credit card” and software. Apple has plenty of liquidity to provide and manage loans in large numbers, and they have a massive customer base. How hard would it be to turn Apple Pay into AppleBank Accounts with Apple Pay replacing checking and credit cards? Then, if you feel comfortable, when you need to buy that new Apple Car, you can get your Apple Loan, and one day that Apple House might be in your sights too.
Even if Apple Pay never morphs into a more complex payment system like a bank, Apple will still have the potential to make millions, and more likely billions, from it annually. Adoption is already widespread by users and businesses. If Apple takes a small commission from each transaction as a convenience fee, that will quickly add up to additional profits.
Into another huge market segment, personal entertainment. Apple TV was never a hot item, but Apple didn’t drop it. We are now seeing the market for media entertainment shift again in its delivery methods and Apple is working to get ahead of the curve by its deal with HBO to provide their content as a sole provider. Hmm… where will this lead? I believe I mentioned this in an earlier article, Apple could be exploring the possibility of being a full-service provider of personal entertainment and this is one of many new steps in that direction. Cable and satellite might be cut out of the deal altogether. Netflix and Amazon have probably already started to squirm at the thought of such a massive new competitor. Apple could call this new endeavor ApplePlay. Only time will tell if this will become a fully functional segment of their business. If it does, it has the potential to be very profitable.
Apple is positioned very strongly to maintain and grow its current marketshare for personal computing devices over at least the next 2-3 years. Any of the other areas that it is currently exploring would only add to that success.
For the audience:
If there was an AppleBank, would you open an account? Let us know in the comments below.
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NOTE: I own shares of Apple stock.
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Reasonability
January 27, 2015 by 2 Comments
If you keep playing with that, you’re going to get hurt.
© Suzanne Coleman, all rights reserved.
by,
Suzanne Coleman
Is that even a word? I have been wanting to ask the stock trading community this: what is reasonable, and what is not? Let’s talk PE.
I started trading during the “birth” of the internet, basically when companies that utilized it for profit were being born and growing, and the computer industry came along with them hand-in-hand.
At this time, people were piling into technology stocks, why wouldn’t you, when all they do is keep going up? PEs were insane, or that’s what the older generation told me. They were normal to me 🙂 I was told that a good, stable company should have a PE of 7 or 8, and a high-growth company might be safe at a PE of 15. Hmm…
Well, in the internet days, a good stable, safe company would have a PE of 30. An insane company that everyone wanted to own (was it cool like an iPhone?) might have a PE of over 100, up to, gosh I can’t even remember for sure, but probably up to 500-700. Yeah, like I said, it was insane.
So now, almost 20 years later, I am looking at stocks again, some of the very same stocks I watched or owned back then, and trying to adjust to today’s market psychology and culture. It’s hard. Here is why.
Let’s start with a biggie, Amazon (AMZN), wow. Well, I had that sucker for a really long time, I believed in it, I thought this damn company has a great idea, it will change the world. Well, it did… But its stock price fell along with many other great stocks during the “hell freezes over” period of my investment history. That was in the early 2000s if I recall correctly. So, I was holding on to it, it was once maybe $350 or so, and then came down to maybe $84. Finally I decided to sell it, I was being too LOYAL (big issue to avoid), holding on to it, hoping it would eventually return to its glory days. Well, then, of course, it did rise back up after years of just sitting there like a lump on a log (while I waited), and now it’s back up to over 300, and has even been at 400. Wow. If only we could predict these things…
So here’s the rub, AMZN is now at 310 with a PE of… ok, I guess they are now losing money so the PE is not listed. Not too long ago, it was in the hundreds, maybe like 600? My question to you all, is this, why would you continue to buy up a stock that is seriously over-valued? I mean, you could lose almost all of your money if it drops down to where it should be. It seems a bit like drug-induced insanity to me… what am I missing? Have I gotten too old for this?
Then on the opposite side of the insane spectrum, let’s look at Apple (APPL). They just reported earnings that were 38% over expectations. No big deal, right? Because we all know that Apple has a great history of blowing away even the highest of earnings expectations. Are we nuts? Maybe. Their PE before this data was factored in was about 17. Pretty reasonable for a company that is still growing and spreading into places like China, with over a billion tech-hungry citizens. Why not buy Apple? I’m not sure when Apple became this generation’s IBM, but that’s what it looks like has happened. Almost no activity on the earnings news, or before it. Odd. The 12-month target will be revised upward and the stock price will go up with it. So, you would think there would be buying now. Maybe they are expecting a dip tomorrow or this week. Maybe they fear… any of many things which may impact this activity. But if you conclude it’s an overall conservatism, it is not. See… Netflix (NFLX).
Netflix also reported better than expected earnings, just a few days ago (and I really should have bought it when I thought about it at 380, damn…) and is since up over 20%. Their PE is over 100. Hmm… yes, they are also expanding into areas around the world, which is smart, but to buy in at a PE of 100 or more, isn’t really that smart. I wonder if the “reason” that people do this is that they think it’ll (like Amazon and Yahoo! used to) keep going up, and if they don’t buy in now, they’ll never get to own a piece of it at these prices. And, so far, in this instance, well this week, they’ve been right.
Look back a few months and you’ll see, well, let’s go to a 12 month chart… you can see that Netflix, like many other stocks these days that seem to do well, has been all over the place, with prices rising and falling significant amounts. There is a high risk of buying in at a high point, and riding it all of the way down into the subway station. And then, if you choose, you can end up waiting there for a plane to show up and fly you back up into the clouds. Dramatic? Yes, it can be. There can be tears, there can be exhaultation (literally), so how and when do you decide to jump on a train and see where it will take you?
Let’s go back to Apple. Strong growth, strong earnings, stable company, good leadership. Since other big, stable companies are reporting earnings declines and less-than-enthusiastic forecasts, wouldn’t you expect more investors to move their money into Apple and out of those losers? I mean, growth and stability, how can you go wrong with that? We’ll see what happens. I know that most big investors are already in Apple, that may be why there hasn’t been much movement today after earnings were reported to the public.
So what do you think?
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The Slice Iconic 