Apple, Inc. (NASDAQ:AAPL)

The concerns I see among negative pitches seem to be that Apple lacks a moat, that Apple is peddling a commodity, that Apple's growth depends on success in market segments in which it has no experience, that Apple is doomed to serve a niche that isn't growing, and that someone will make a lower-margin music store and knock off iTunes as the market leader.

I would like to comment a bit on these concerns.

Apple's hardware at present contains, it is true, very industry-stndard components capable of being bought by any competitor. At one time Apple had, for example, different CPUs than other major vendors used in laptop and desktop computers. No longer. The upshot is that Apple's computers are capable of running the same operating system and application software that at one time prevented users from migrating to Apple hardware. In short, the moat around the "Wintel PC" is gone. The moat issue, which once worked to ensure Apple was stuck serving a niche with applications that required its sole-source hardware platform, now works in Apple's favor.

Apple continues to make both applications and an operating system capable of running on both its legacy platforms and on the Intel-based platform. Unlike Dell, Acer, and Lenovo, Apple can update its OS to support hardware innovation as fast as it pleases, rather than as fast as Redmond pleases. EFI is an example; currently-selling Dells all still use BIOS. 64-bit is another example: to use 64-bit applications on a Dell, you need a special 64-bit Windows that isn't compatible with most applications on the planet. Apple, meanwhile, is free to develop what it needs to make the most of its hardware sales opportunities. Speaking of "free", by the way, Apple does not pay MSFT a cut of every Apple device sold, unlike other PC makers. Since Apple is free to use the same component suppliers, but is free of Redmond's tax, Apple actually has better margins when selling the exact same box.

Also, Apple develops software. The movies you see on the big screen are full of the little touches Apple-supplied software allows filmmakers for special effects, scene editing, sound mixing, and so on. Software is high-margin business. Ask MSFT.

Meanwhile, Apple's profit is overwhelmingly in hardware. Apple maintains a moat with patents. The iPod scroll-wheel? Patented. Troll through uspto.gov sometime and have a look at Apple's hardware patents. And since Apple is the bestselling MP3 player, Apple is in a position to enjoy advantages in pricing and availability of key components, especially during a shortage. Apple's music shop (well, now also a podcast database and a movie store) isn't where Apple makes the money, so if someone came along and ate Apple's breakfast in song downloads, Apple's profit would not be impacted. The iTunes Store is allegedly breakeven or slightly profitable, and I fully expect that is carefully engineered by Apple to make sure there's not enough margin left in the business for a competitor to set up a profitable online music business by underpricing Apple. Competitors licensing the same music will have to charge something like what Apple charges, or give it away for free as in some of Napster2.0's promotions. Speaking of Napster 2.0, when will the cash finish burning?

Apple's share of MP3 players could hardly grow, but the size of the MP3 player pie certainly can grow -- outside the US, in particular, growth is very feasible. How many MP3 players are sold in South America yet, anyway? Has Apple got a presence there yet?

But Apple's largest money is still in computers. Since adopting a Unix operating system, Apple has become the highest-volume Unix vendor on the planet. Apple's new Unix platform has made it attractive to developers and to IT folks, who enjoy both the stability and the security of the Unix design (did you realize that to avoid performance problems in Windows, MSFT actually has user programs run code in kernel space? No wonder the machines are so thoroughly compromised when bugs are exploited!). Apple's growth in universities has put it in a position that NT was in during the early '90s: just starting to convince the up-and-coming generation of University-trained folks (who will end up supporting computers, establishing computer support policy, and making purchase recommendations) that Apple's Unix operating system is an easier alternative to the status quo (which, ironically, was in the early '90s Unix without Apple's UI).

Lastly, a word about sales. In the '90s, Apple had high sales but was bleeding cash. After Jobs returned, share dropped further, but product lines were focused and profitability returned consistently, quarter after quarter. Apple competes in the PC market in a market segment that does not include ultra-low-end (e.g., $199) boxes. Apple competes in a market segment in which Apple is persuaded there is actual profit to chase. Apple has shown it now is willing to price hardware extremely competitively with other hardware sharing similar key features (CPU, bus speed, screen), which is a positive change for Apple's products' competitiveness. Apple will not be the cheapest box in Best Buy, but it will be very competitive with similar hardware from other vendors. But then Apple throws some Apple's software into the bargain, making the deal rather good for anyone planning to use the machine as a general purpose computer (and not, e.g., a POS device or teller-drawer-operator).

With a sea-change underway in opinion about the utility of Apple's operating system for general tasks, and the elimination of the barrier once created by the architecture difference, Apple is in a better position to grow its PC share than it has been since the '80s, when it first popularized the GUI for general-purpose computers. Apple continues to present designs that appeal to users, making its products distinctive even when many components are shared with competitors' products.

Apple has, of course, announced iTV (will it do for multimedia what iPod did for music?). As with Apple's speaker system, Apple need not move the most units to have one of the largest profits in the market. And the press have started insisting an iPhone gadget or two are coming "real, real soon now ... any day ...." If Apple's long delay in releasing phone hardware reflects its careful design for a product people will really enjoy, Apple may make more money in the high-end phone market than it does in iPods, and that says quite a bit; but the phone market is so huge, even small share could have significant impact on Apple profits.

So I see Apple as a story of growth and profitability for the long term.

You have to ride the wave with Apple stock - shorting it in January and February and buying it in March. Between the beginning of the year and early March, Apple stock took about a 34% beating because (1) the technology sector as a whole got hammered; (2) Apple consumer products are not expected to sell well during a recession; and (3) MacWorld didn't live up to its hype. It would have been smart to short the stock during this period, because the catalysts were so obvious. Its technical rating is average and its industry group's relative strength is very weak right now. However, it has excellent fundamentals, EPS, marketing, and management and there is no way this stock is going to stay at low levels. It has always been about predicting the bottom then buying low. I believe the bottom occurred at about $119 around early March and predict that it will make a rapid accession to the its previous levels. Its P/E is 33.58, which is about double all its competitors. However, that is still about the lowest it has been in one year and taken into account growth (22.38% next 5 Years per annum) PEG is only 1.32, which is average for its industry. That is too cheap, Apple should be trading at a premium. Moreover, Apple has beat EPS consensus for at least the past 11 quarters, all by healthy surprise percentages. Apple's economic engine is really iTunes and the iPhone (both the phone and the subscriber cut from AT&T). Decreased inventory of current iPhones, Apple's product cycle, and news from AT&T make it likely that the next iPhone is probably going to come within the next month or so if not sooner. It is likely to have GPS, and maybe even an OLED screen (more energy efficient, thinner, and more vibrant) and GPS (instead of BS Google maps and triangulation). This will obviously be a catalyst, because it will sell very well - people have been waiting for 3G data connectivity speeds, new applications and games (watch out Nintendo and Sony) from the SDK will attract more customers, and the enterprise options will attract small businesses (some marketshare from RIMM, but RIMM will still have a hold on larger businesses for the time being). The MacBook Air hasn't been a run-away hit, but it is another halo product and Mac sales have been increasing, even during our slowing economy. In addition, Apple fanboys, Fashionistas, and females are three groups that will continue to stay loyal to Apple. The shorts are not holding this stock down as only 2.7% of float at shorted. One year target price is around $190 to 200. You should be careful, however, because Apple tends to be priced for perfection and thus can be very sensitive to bad news.

Way overvalued. Expect price to fall below $100 in the near term.

P.S: I don't own any stock in Apple.

The valuation's astronomical, and red-hot iPod sales are finally beginning to cool. Still, Apple didn't get this far by being stupid. Faster Intel-powered Macs with the capability to run Windows will help, as will the inevitable debut of the iTunes Movie Store and next-generation video iPod, once Apple gets the stubborn, greedy movie studios to knuckle under. But I still think the greatest boost will come from an entirely new iPod-like gadget that no one will see coming. Underestimate Steve Jobs' marketing savvy, and Apple's ability to make and market stylish, well-designed products, at your own peril.

I am in college and every freshman has an Apple laptop. Second, the iPohne and iPod aren't just status symbols they are part of life. Hello it's the next CD player !!!!! First there was cassett player, then a CD player, and now the iPod and or iPhone. People bought more than one CD player in their life and the same goes for Apple products.

Stock is up big, but just doubled my stake in RL at just under $400/share ($393ish). Just too cheap for such high margins and growth IMO.

Copied from my blog post:

As a quarterback, you call the play in the huddle and then approach the line of scrimmage. While the play design might be a 5-step drop, play-action pass down the middle of the field, things change. Maybe the defense is blitzing your blind side and you have to call a hot route. Maybe you audible to a draw play to exploit the area the blitzing linebackers should be. Either way, you TAKE WHAT THE DEFENSE GIVES YOU.

I think that stocks are very much the same way. No matter what your investing style is, you have to adapt to what Mr. Market gives you. Being able to adapt is a huge advantage for the generalist investor. That's why I don't particularly like strategies that are too dependent on specific criteria like "low p/e, fast growth, etc." Heck, while I have particular investment characteristics that I like/dislike, I don't let them blind me from what is being offered in the market.

I often look for hidden small-caps, special-situations, etc. However, I am hard-pressed to find more of a no-brainer investment right now than Apple. I have owned shares for a long time now and am well over 100% on the investment, but just doubled my stake today.

It is simply an unbelievable company at a great price. Even with shares bid up, if you back out their cash (which could very well be used in acquisition activities soon.. hello HULU!), they are trading for about 14.3X ttm earnings. Paying less than 15X earnings for a company that grew EPS by 120% in the last quarter, is firing on all cylinders, has huge expansion opportunities in China... I mean thank you Mr. Market! For the patient investor, I think that this is a truly great offer from Mr. Market to get into an incredible fast-growing business at a great price.

The play-call might have been an obscure micro-cap trading for less than tangible book with hidden assets, but for now, I am going to audible to the simple draw play right up the middle: Apple (AAPL).

Apple's excessive volatility makes it clear the market is very confused on how to value this company, especially because it is such a huge innovator in its field. My prediction is that history will show the Ipod as the driving catalyst for propelling Apple products mainstream. For all Apple's recent growth lately, its share of the PC market remains at roughly 3%. There is huge growth potential here. And as an Apple consumer myself, I am well aware that all of the incredible features that the world loved about the Ipod (incredible user interface, powerful, clean, beautiful) are baked into each and every Apple product, including their PCs. It's only a matter of time before the PC business takes off. Even a 10-15% market share of the PC Business represents huge PC growth for Apple. And keep in mind, revenue from their PC business far outweighs revenue from the Ipod.

Is all this growth baked in at a PE of 32 and a forward PE of 26? I don't think so. And the market will definitely provide even greater discounts along the way. Apple is golden for the long-term.

I believe Apple will benefit from the Stimulus Package that will soon be passed by the Senate. A good chunk of money will be put toward improving the technology within our nation's education system. The younger generation is a big fan of Apple products and I expect their PCs will be purchased by those who grew up as young teens who carried around an I -Pod through their college years. Apple is an outstanding company that has built a brand that many are willing to pay a premium price for and they have millions of young consumers in the pipeline!

The iPhone is a little gold mine, iPhone 3G will be more of one. The iPhone-for-business idea will get Apple some positive exposure in the currently-Windows-dominated business computing world. For everyone I know that actually buys music, iTunes is the de facto standard. MacBooks are gradually taking over the college campus. Vista is a nightmare. And Steve Jobs is a manipulative marketing genius.

I can't imagine how any combination of that wouldn't outperform the market.

People really underestimate what is happening.

Within 10-15 years, Apple will be the dominant home PC platform, through a combination of iPhone, iPad, AppleTV and Mac.

We're seeing a major shift that is still in its early stages.

I work in the tech industry, and a day doesn't go by that I don't see stalwart Windows PC guys picking up iPads/iPhones.

This will be a $500+ stock sooner than most can imagine.

In addition to iPod and dual OS PCs (with Intel inside), I'm expecting Apple to make a big announcement in the Home Entertainment space. At least, I'm hoping they do. :)

Apple has consistently outperformed the S&P 500 this past year and no one should be surprised by this. They have consistently released new products each fall before the Christmas season including new IPODs and last year the additional iPhone mobile device. Apple is a forerunner in the industry developing products ahead of their competition.

Caps price $369.32

I consider Apple was of my favorite long-term investment. With the miss on earnings which caused the stock price to drop some, it may provide good short-term opportunities too. The report was in my opinion a good one. It didn’t disappoint me, I couldn’t be happier with the results. I am also glad that some investors sold, I am hoping they sell more so I can finally grab a larger holiday position. And the holidays should be excellent.

The valuation is excellent. The PE at a price of $392 was 14.16. Compaq has a PE of 5.83 and Dell has a PE of 8. Computer companies don’t carry high PEs generally, but Apple deserves their premium and I expect as sales increase, the PE could expand. Compaq sales dropped during the same quarter that Apple’s grew by 39%. Dell sales for the third quarter were up less than 1%. Compaq and Dell’s businesses are in decline, they may not deserve even their present low PEs. Apple does. Apple business is still fully in growth mode.

But perhaps a better way to value Apple is to look at their cash flow yield at $392, the cash flow yield is 9%. Even if they don’t grow any more, they are undervalued by that metric alone. And I am sure they will grow cash flow over the next two years, barring a major economic meltdown. They could easily pay a 4.5% dividend without missing it.

On Wednesday I was able to buy my holiday trading position around $369. In sideway markets, I try to buy much larger positions in only my most high confidence stocks. Apple is one of them. I believe their holiday report will be spectacular.

October 18, 2010 4Q:2010 earnings’ highlights:
** 4Q revenues were $20.343 billion up from $12.207 billion
** Fiscal 2010 $65.225 billion up from $42.905 billion
** TTM revenues were $65.225 billion or $70.22 per share
** 4Q earnings $4.64 up from $2.77
** Fiscal 2010 earnings $15.15 up from $9.08
** Diluted share count 928.825 million
** Cash $51 billion: 0 debt
** Cash flow for the year was $16.59 billion or $17.86 per share
** Cash flow for the quarter was $4.89 billion
** Trading range between October 18, 2010 and January 18, 2011 was $297.76 to $348.48: PE Ratio range was 19.65 to 23: PS Ratio range was 4.24 to 4.96: Cash flow yield was 5.1% to 6%

January 18, 2011 1Q:2011 earnings’ highlights:
** Revenues were $26.741 billion up 70.5% from $15.683 billion
** TTM revenues were $76.283 billion or $81.74 per share
** Earnings per share were $6.43 up from $3.67
** TTM earnings were $17.91 per share
** Cash $59.707 billion: Debt 0
** Diluted share count 933.154 million
** Cash flow was 8.559 billion up from $5.4 billion
** TTM cash flow was $19.74 billion or $21.15 per share
** Gross margins were 38.5% down from 40.9% last year: Operating margins 29.27% down from 30.13%
** Trading range between January 18, 2011 and April 20, 2011 was $320.16 to $364.90: PE Ratio range was 17.88 to 20.37: PS ratio range was 3.92 to 4.46: Cash flow yield was 5.8% to 6.6%

April 20, 2011 2Q:2011 earnings highlights:
** Revenues were $24.667 billion up from $13.499 billion
** TTM revenues were $87.445 billion or $93.44 per share
** Earnings per share were $6.40 up from $3.33
** TTM earnings were $20.98 per share
** Diluted share count 935.944 million
** Cash $65.8 billion: debt 0
** Cash flow for six months was $15.899 billion up from $8.1 billion
** TTM cash flow was $23.4 billion or $26.06 per share
** Gross margins 41.42%: Operating margins 31.92%
** Trading range between April 20, 2011 and July 19, 2011 was $310.50 to $378.65: PE ratio range was 14.80 to 18.05: Cash flow yield range was 6.9% to 8.4%

July 19, 2011 3Q:2011 earnings’ highlights:
** Revenues were $28.571 billion up from $15.7 billion
** TTM revenues were $100.316 billion or $106.96 per share
** Earnings were $7.79 up from $3.51
** TTM earnings were $25.26 per share
** Diluted share count was 937.81 million
** Cash flow for nine months were $24.485 billion up from $11.67 billion
** TTM cash flow was $29.41 billion or $31.35
** Trading range July 19, 2011 and October 18, 2011 was $353.02 to $426.70: PE ratio range was 13.98 to 16.89: PS ratio range was 3.3 to 3.99: Cash flow yield range was 7.4% to 8.9%

October 18, 2011 4Q:2011 earnings’ highlights:
** 4Q Revenues were $28.27 billion up from $20.343 billion
** Fiscal 2011 revenues were $108.249 billion up from $65.225 billion
** TTM revenue were $108.249 billion or $115.22 per share
** Earnings were $7.05 up from $4.64
** TTM earnings were $27.68 per share
** Diluted share count was 939.517 million
** Cash $81.57 billion; Debt
** Cash flow was $33.269 for fiscal 2011 or $35.41 per share
** Cash flow for the quarter was $8.78 billion up 79.6% from 4.89 billion last year
** Gross margins were 40.3%: Operating margins were 30.8%
** Trading range between October 18, 2011 and the present was $394.21 to $408.42: PE Ratio range was 14.24 to 14.76: PS ratio range was 3.42 to 3.55: Cash flow yield range was 8.7% to 9%
** Special note: The stock fell about $24 per share to close at $398.22 a day after the report October 19, 2011.

This is a world class company with no debt, huge cash pile and greatly undervalued. Too much focus on the Iphone being unlocked. Should continue to outshine the market for the near future

Strong innovative company. Growth expected in Mac sales will offset slowdown for the ipod. The iphone will be a winner, though sales may be slower than expected. Significantly below peak price near $200. Good buy under $120.

Grossly undervalued. I think investors are shocked how far they've come and don't believe the stock should go higher. This one is growth at an absurd price. I normally don't put my large caps in CAPS because they _are_ the benchmark, but this is so out of whack that I have to include it.

http://www.fool.com/investing/general/2012/01/25/apple-is-peaking.aspx

Come back in two or three years, and I believe that the growth story will start to crumble.

Consumers will move on to the next big, shiny thing and reduce Apple to a niche player once again. Any empire built on the taste buds of retail consumers stands on feet of quicksand. The circle of life complete, Apple shares will be a whole lot cheaper. You can quote me on that.

AAPL is a company with products that users love. Go to an Apple store and feel the products. They are a class of their own.

Stock has been beaten down because of concerns about slowing economy. Also, people were too used to major annoncements from Apple which they didn't get recently. However, iPhone, Macbook Air, and IPTV will ensure future earnings. It is not unreasonable to assume that earnings will eventually reach $6. With a stabilized P/E of 25, the stock should be at $150.

I propose that $6 is a very conservative estimate. There is much upside to this stock with international exposure and dollar decline. One should seriously consider being long on this stock at this time.

I've been indifferent to Apple for years. I am a PC user, always have been, always will be. Every place I have worked is PC.

2 Years ago my husband wanted an iPod shuffle. I got him one for his birthday. Older generation 1 GB shuffle for $99. Well, I like listening to his music files on our PC. At the advice of my psychologist (yep, I got issues) I was supposed to start blocking out the noise of the world more. So I just bought myself a 1GB purple reconditioned shuffle for $39. I'm loving it.

I looked at the other things they offer too at the apple store. Wow that iPhone is cool. I am now a convert. This company is quite innovative and ahead of the pack. May not have market share, but they seem to be the leader of the pack. I'm betting on their long time success!