Comment by pzo
15 hours ago
This is what’s all bad with us stocks and completely disconnected with market value: Revenue jumped 4x but market capitalization got inflated to 12x.
15 hours ago
This is what’s all bad with us stocks and completely disconnected with market value: Revenue jumped 4x but market capitalization got inflated to 12x.
Investors are forward-looking, though, so it just means that they think the future looks brighter than the immediate past.
The real disconnect IMO is TSLA.
Equities as large as Apple act as stores of value like gold, so it could just mean there's more money to be invested. You would need to compare Apple against what happened to the market in general.
The price over earnings (arguably an imperfect, but better way to compare stock prices against each other than using pure revenue) for Apple has been fluctuating within about a factor of 2 for the last 20 years. Since before the iPhone, people were nervous about the possibility of sustained growth of profits of the company, and the P/E was similar to today. Once Apple started making a lot more money under Tim Cook, the price was at a relative discount becauee 10 years ago people were certain (but wrong) that this run would end soon and badly. The long term stability under Cook was truly impressive. Lets see what the markets think abiut the leadership change tomorrow, but probably this is not an immediate event.
pe ratio under 10 in 2013 to ~40 in 2024. You can't deny the multiple expansion.
To be fair, a PE <10 didn't even represent the ground truth of customer's relationship to Apple at the time. In hindsight we have a lot more information, but in that era there was still a lingering question of whether their iPhone advantage was durable, due to Android competitors. It only later became apparent that the stickiness factor was super high.
From a correct pricing perspective, of all the companies in tech Apple seems one of the most likely to keep customers for a lifetime. They have immense lock-in and customer affinity. I don't know if the correct number is 20 or 30 or 40 but unless the economy completely tanks (which tbf is reasonably possible these days), I can only imagine a majority of their customers today will still be their customers in 15-20 years.
Some of that is debasement, but some of that is that there is no other brand like Apple.
Would you not own stock of the most valuable brand in human history?
It's not the brand - it's not like Apple's hit this valuation in isolation Meta, Nvidia, Google, Microsoft all enjoy similar.
It's the cash-money value of putting a fee on all digital goods and subscriptions and cash transactions in a world predisposed to forming and consolidating around monopolies. What does Apple's services revenue look like in another 20 years when Africa, China and India are paying their smartphone provider every time a dollar moves, a few billion more people paying one of two companies every time for their music, movies and tv, games, books, real-world transactions... in de-facto perpetuity.
Most valued brand, not the most valuable.
Yep. QE was a monumental mistake that killed economic mobility. Asset owners vs wage earners.
Do you think market cap should be proportional to revenue?
True, but also Apple is in a far more dominant position today.
Alongside Nvidia they essentially monopolize TSMCs entire latest generation chip supply.
That’s a moat in hardware that is going to get even stronger over time. Given this hardware moat they can dip their toes gently into the B2B market they’ve never really cared about and pick up another few hundred billion in high margin revenue over the next 10 years no problem.
I’ve always found it weird that Apple’s entire org runs on Mac but no other Fortune 500 company on earth does. Seems like an opportunity to nibble away at Microsoft.
You want to be careful about who your customers are, and what they will do to you as an organization. Enterprise customers create enterprise teams create enterprise culture creates enterprise rot. Apple is wise to play to their strategic position as a consumer product company that lives or dies on great product, because when the buyer is the user thats what they demand.
The real strategic risk for Apple is if it overly locks-in users and falls back into complacency. The discipline of having to continually win customers with better product is ultimately the only thing that will cause them to thrive long term.