Dear Reader,
I estimate the mid-term intrinsic worth of Apple is around 1.2 trillion USD or more than 34% below the current market capitalization.
Why? Because US technology stocks, especially the biggest five Apple, Amazon, Alphabet, Microsoft and Facebook are in a bubble, akin to the dot-com bubble.
In fact, in my opinion, the current technology and other stocks bubble is the biggest bubble in history, in market capitalization to be lost, at least!
The market simply implies that everything will be rosy, the economy and technology stocks' revenue and earnings will grow forever at a rapid clip. As the coronavirus showed positivity's value is limited, to say the least.
Nasdaq composite's recent fall could actually extend beyond 40% from the recent peak. However, that is not what I think will happen. The real fall in the main global stock market indices will happen after the November 3 US presidential elections. Then the Federal Reserve will take its foot off the money printing gas pedal and the economy and the banking sector will be allowed to fall. So the current stock market decline will stop at around 20 % - 22 % from the recent peaks.
Apple has staked its future on services, according to Wall Street research analysts. Actually, that is a misleading conception. Apple uses its services to lock in services into its walled off garden of iPhones and iPads. Even if Apple mildly increases its market share in smartphones and tablets that will increase its revenue and earnings quite a bit.
So Apple's future is firmly connected to its hardware devices. That said, revenue from services has been growing much faster than hardware and is now formidable both in terms of percentage of Apple's revenue and an absolute sum.
However, at a Price/Earnings ratio of 34 the market simply overvalues Apple and its prospects. Apple is already huge in market capitalization size, revenue and profits to grow like a small or mid-size technology start up. The smartphone market is already in a decline. Television sets, in my opinion, could be an interesting avenue for future growth for Apple. In order to justify its current valuation Apple simply has to enter, win and dominate new markets, which is easier said than done.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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