Working at a small shop now, and seeing this same behavior, it's a little frightening. In our case, and from my perspective coming from a couple of startups more recently, and large enterprises prior to that: terrifyingly frustrating for a number of reasons.
I'm in a great spot to make suggestions from my accumulated past, but the team and management seem terrified to make the jump and have nestled themselves nicely in the niche of "let's just do what's easy for now" while still telling themselves they want to grow grow grow, but I don't think management is quite aware of what this growth is going to mean internally for our ability to solve problems with the toolsets we have (both for support and project management).
Every morning we have a company wide meeting where capturing more market share is a recurring theme. And immediately after that meeting yesterday in a developers only meeting, an inordinately large amount of time was spent on discussing how we can introduce new features yet still accommodate those of our customers who don't have internet access.
Because, as you know, if you want to capture more market share with software in 2016, you want to focus on people who don't have internet.
We finally put Internet access in all of the warehouses and told the truckers they had to end their night at the warehouse and log their hours there. Several drivers quit because it was too much of a burden to drive that far every day. But then we finally got to upgrade the software to support showing customers where the trucks were at and how long it would take to get to their locations.
It would be awesome if technological progress was more evenly distributed across the population.
I understand that any good company wants to provide quality service to all of their existing customers, but dedicating resources and devising workarounds for that small percentage of disconnected customers (to the detriment of the thousands of others) while our mission statement is to "capture market share" seems counter intuitive to me.
Or...they are unwilling to allow the company to eat losses to pretend to invest in the long term, but are in reality on their way to failure (for example). Let's not act like companies, in general, have this figured out and know what's best. Lots of them fail.
If you want long term growth, you're free to invest that way. But don't impose your preferences on others, or assume their method is wrong. The only way speculators, or anyone, can buy shares is by someone else deciding to sell, uncoerced.
Not sure I understand. How do you grow revenue unless you're producing something that someone wants, presumably because it solves a problem and makes the world better?
If I were a company I'd pay a lot of money to find other ways to grow!
Much more of a risk than bumping the iPhone specs.
For example, if my ISP charges my $10 more a month, they aren't necessarily solving any problems, but it's still growth for them.
Not only that, if there is no growth in the next few quarters Apple will be considered to be in "bad shape" which is insane when you consider the size of the company and its revenues.
This is not complicated. You buy with the expectations of future profits X. If the stocks fails to meet those expectations, you reallocate your capital by selling to someone else who is happy with <X.
There is nothing nefarious about it. Nobody is a failure. The system isn't broken. This is the free market.
How is the long-term R&D of Apple affected by a bunch of shareholders exchanging ownership with new shareholders?
there isn't anything wrong with Apple's stock selling off violently, as much as there was anything wrong with people bidding the shares up so high under the idea of selling it to someone else at a higher price.
there are plenty of companies that are content with steady or even cyclical growth/earnings. in many other countries were local stock markets are not popular venues for speculation and capital formation, it is quite respected to have steady earnings without a drive to quarterly growth.
that being said, many places that are low growth envy the high growth areas, especially how it has been achieved in the US markets.
The stock price doesn't just reflect the amount of money the company has. The stock price reflects the "fully loaded" expected value of that stock. That means it prices in ALL expectations.
If the company you buy performs exactly as expected, then you don't actually make any money because you paid the price that reflected those expectations, so whatever dividends the company issues will only compensate you for the premium you paid. So the stock has to outperform expectations before it's worth buying.
The "expected value" of the company actually discounts dividends and the like, because the value of money in the future is less than the value of money today.
There's an amusing side point to this, which is that a perpetual annuity actually has a finite value [1].
Suppose you buy a perpetuity, granting $X every year. After 100 years, you'll have 100 times $X more dollars, but you will be worth exactly the same as you were worth before the perpetuity. (This assumes that the market correctly prices the perpetuity so that the expected value of purchasing it is $0).
EDIT:
I'm not talking about "profit" because it's not really a super useful concept here. Having a larger quantity of dollar bills after a period of time does not mean that I've got more value. Trivially, if I have $100 in 1950, and $101 in 2016, I have made a "profit" of $1 but lost a substantial amount in real terms.
I should cite sources and use correct terminology.
Wikipedia provides the following [0]
> The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.[1] In other words, it is used to value stocks based on the net present value of the future dividends.
It's a nice Econ lecture but markets do not actually behave by a manner of collective estimate of dfcf. I would say it's more accurately described as a random walk with an upward inflationary bias.
I believe you would agree with me that a company could exceed expectations while at the same time not growing (by giving out a bigger dividend, or buying up its own shares with its profits).
But that's not really what you're doing when you invest in an S&P index fund, right?
The stock will cost a fair market-clearing price for its expected return, risk-adjusted. But often a stock, or a perpetuity, is a good purchase for one or other market participant - no different from a loaf of bread bought at a fair market-clearing price.
One can say that this "risk premium" actually reflects the expectation that things don't go as well as expected. But the fact is that in the aggregate and in the long term equity investors are still doing "better than expected" and there is no agreement on why it is so (this has been called the "equity premium puzzle").
Down voters: valuation = income / ( discount rate - growth rate )