Cowan on Apple: The ‘powder keg’ is about to explode

This note from analyst Timothy Arcuri landed in my inbox Monday with a bang:

Valuation has expanded but AAPL still trades a touch below its normal discount vs S&P500. Against this backdrop, results should be fine or better and we think March guide will be fine (focus shifting to iPhone 10/X anyway). Hardware margin pressure is clear (especially in launch this Fall w/~$50 incremental OLED cost) but services remain offset. Regardless, the “powder keg” is about to be lit.

My take: There’s nothing “normal” about Apple’s discount to the S&P 500.

Apple will report its Q1 2017 earnings Tuesday Jan. 31 about half an hour after the markets close. The conference call with analysts starts at 5 p.m. ET (2 p.m. PT).  I’ll be listening in. You can too. Click here.

4 Comments

  1. Robert Harris said:
    As much as I wish the multiple was 25x vs 15 I’ve always felt the lower PE iAds a certain security to the stock. Just my simple view. I would be scared if it was above the S&P.

    2
    January 30, 2017
  2. George Providaked said:
    Since stock value is overwhelmingly a bidding process with little regard to fundamentals of earnings, profit, ASP, market share, etc., but rather popular narratives that have little bearing on fundamentals.

    Compound this with herd instinct and deep misunderstanding of Apple’s goals, values, internal processes, and fundamental business model that Apple is very transparent about (albeit Apple with regards to business vs future products remains very secretive about. Even rumors of Apple product drive competitors to try to “beat” Apple to market) it is suckers bet to predict Apple future stock price.

    Apple’s continuing stock buy back at its current low price and dividends (perhaps both substantially enhanced due to the prospect of tax changes) is the best short term bet for rewarding stockholders.

    I should observe that analysts are paid to predict what the “herd” will do on future stock prices versus what the real stock value. This is a very fraught exercise that may be based on fundamentals, but must genuflect to the whims and whimsy of the market.

    5
    January 30, 2017
  3. Alan Birnbaum said:
    What aboust Microsoft (MSFT) with P/E of 30 !

    0
    January 30, 2017

Leave a Reply