Comment by venus | Hacker News Reader

Comment by venus | Hacker News Reader

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I've just been re-reading How to get rich by Felix Dennis and this quote springs to mind:

> But a public company exists only to boost its share price, and its share price is determined, incredibly enough, by 'analysts' - spotty-faced youths who live on another planet where growth-at-any-price is the only deity one is encouraged to worship. Medium- or long-term strategies were for wimps and amateurs, in their estimation, This quarter's results, this quarter's growth, were the only things that mattered to them. It almost seemed, at times, as if profit was a dirty word. If we were making 'profits', asked the 'analysts', weren't we in danger of 'wasting' money that could have been invested to produce more 'growth'?

I thought it ridiculous when AAPL rose above $500, presumably because a mobile phone company is now the most important thing on earth; I find it equally ridiculous it's back under it now, for unknown and unknowable and probably nonsensical reasons. The madness of crowds...

The funny thing is that if you did look at Apple's profits, and the profits and stock prices of other companies, Apple should cost way more than $500.

You don't value based on a companies profits. You value a company based on your belief of their future profits.

Or dividends. If Apple paid $100 per share and it cost $1 per share, it would be a good investment even if you thought the entire company was about to explode in a giant fireball.

And then there's something in between ;)

A Daring Fireball would you say?

Only if I were more clever.

You don't base it solely on that, either. Price is determined by the imbalance of buy and sell orders. Investors might decide to buy or sell based on a multitude of factors, including but not limited to earnings and growth potential.

There's the insane repeated quarterly profits sometimes growing at 75-100% (startup scale) - then there's the growing cash hoard that exerts it's own gravitational field.

These put together should make AAPL far more valuable than it is even considering it's the most valued company in the world by market cap.

By the numbers almost any way you slice it, AAPL is undervalued. Forward P/E of 8.86 is insanely low considering how diversified the company is in comparison to say, MSFT or GOOG.

Are you trying to argue that AAPL is more diversified than MSFT?

http://blogs.technet.com/cfs-filesystemfile.ashx/__key/commu...

Of all the things on that chart, aren't Windows and Office still the primary money makers?

If you are going to make that argument, almost all of Apple's income comes from the sale of a small handful of hardware products.

Most of it's profits are from two products (and you could argue that they're actually just different sized versions of one product).

I suspect if you look at the correlation between people who buy / use Office and people who buy / use Windows you'd find something very similar - they're closer to one product than they are to two.

In reality neither company are particularly diversified (ditto Google who are basically still a search company if you look at where the money is made).

http://www.zdnet.com/blog/bott/microsoft-apple-and-google-wh...

For profitable product lines, yes.

Just because sell-side analysts put out price targets on companies doesn't mean that they determine stock prices. The price of a stock is mostly (especially in the long-term) determined by the supply and demand for it.

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