Tuesday, April 19, 2011

Is apple stock overvalued in 2011

As apple is about to release its earnings and Google has just lost 15 billion of its worth. The question that came to my mind is apple stock overvalued. Currently apple is worth around 300 billion dollars and one year ago it was worth 150 billion dollars. Its expecting revenue of 22 billions dollars and earnings of around $5 per share.

People have been saying Apple stock have been overvalued since early eighties when I first used an Apple II at our neighbors house. So why is my gut now saying that Apple is in trouble.

Below are my reasons that apple stock is currently overvalued in 2011.

1. First and most important is that Steve Jobs is on medical leave and his vision is what gives apple it most value and its future value.

2. The Stock market is overvalued. I am a zerohedge reader and the people their used to follow stockmarket but now due to all the HFT's a tipping point has been reached in terms of validity of reports being published and validity of stock values. It really seems the US stock market lives on a different reality to what is actually happening in the US. So in an overinflated stock market, Apple is the safe haven for Stocks.

3. Japan Earthquake will have a significant effect on earnings on all major companies including Apple. If its either due to availability of components or japanese consumers.

4. A lot of Apple products are price sensitive in terms of they are products that do well with people with a lot of excess income. We are now in a financial situation where all major commodities are increasing and when people have less income, then price over quality becomes more of an issue and this will effect apple products. e.g Android over Iphone.

5. The market is getting saturated, this happens in all markets and example last year I saw a significant amount of my friends/family get iphones. But not lately and I am guessing IOS products are turning into Windows type products where majority of new sales are from upgrades not new products. Really only growth is in Asia and they are facing inflation issues.

6. Apple as a company is losing kama points and influencers buzz by being so strict on the jail breaking community and keeping locations details in terms of movement of its users.

7. Nearly 50% of revenue comes from iphone type products and services. This is not really a concern for me until android and windows/nokia start eating into its revenue which will happen but they might increase the market so much that its not an issue.

So my reasoning on why Apple stock is overvalued, is that Apple is losing its vision, the stock market is overvalued, effects of tsunami and people just don't have the funds that they used to have and apple's market is getting saturated with apple products.

With all above said, I love Apple products my favourite consumer device ever was video Ipod, favourite computer was a macintosh and I always wanted NeXT operating system and an iphone. Most amazing product seen in real life is an Ipad. So their has to be value for a company producing those types of products but how much.

There is an article at CNN which writes why apple is undervalued


Anonymous Anonymous said...

You must feel really stupid now.

1:28 am  
Anonymous Anonymous said...

You must feel really stupid now.

1:29 am  

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