Agathon to discuss Apple's stock price

[notyoueither]

So is cash.

[snoopy369]

I'm curious if you'd have had the same opinion in ~1995 or so of MS, when its P/E ratio was >100...

You remind me a lot of my dad, except the inverse - he was an anti-MS investor and somewhat pro apple in the late 1980s-early 1990s. Not an Agathon-like fanboy, but he felt Apple was the better investment at the time, and MS would fall due to its P/E ratio, and due to his belief that Apple was the superior technology to Intel. So, he sold MS short (as part of his overall stock portfolio, which otherwise outperformed the market by ~8-10%, a mixture of small-cap stocks that he personally researched and large-cap stocks for stability).

I'm sure you can figure how that story went... MS would go down a bit, and he'd be encouraged that MS was finally feeling the P/E bubble, and then it would go back up again... and overall it went up fairly steadily, on a long-term (multi-year) basis.

The whole time his argument was entirely sound - the P/E ratio was insane, way higher than it is now, and this was before MS had a strangehold on the desktop PC market, not to mention on most of the major business software platforms. Yet their stock kept rising...

We'll see if this happens with Apple or not... I hope you don't lose too much money (or at least don't lose more than you can afford...) shorting Apple though

[notyoueither]

Who? Me?

I wouldn't put $0.05 near the stock market at this time.

I just said I expect the whole rotten mess to blow up in 1929 proportions, or worse since it's been put off so long with jury-rigging.

I wouldn't short anything either, since if my misgivings are correct a lot of the people who would have to pay the short would be bankrupt and unable to pay.

[Asher]

I don't think theres anything fundamentally unsound with the market as a whole, just a bunch of stocks that are needlessly risky like Apple.

[snoopy369]

That was directed to Asher.

Do you know how Shorts work, NYE? In a short, you get the money now, and then have to buy the stock later ... doesn't matter if others are bankrupt, that just helps you.

[notyoueither]

Originally posted by Asher
I don't think theres anything fundamentally unsound with the market as a whole, just a bunch of stocks that are needlessly risky like Apple.

The unsound part would be the nature of the capital (borrowed) that many of the investors brought to the table piled on top of the cash forced into the market by various retirement schemes.

My assumption would be that the stock markets, real estate markets, and the pachinko markets are like geese that have been force fed for a long wile. The livers are about to explode, followed by a predictable decline in the health of the birds.

[Asher]

There are huge differences between MSFT in the 90s and Apple now. Mainly MSFT had no competition. Apple was a joke. Also mainly that the market was not mature like it is now. MS could, and did, make serious ****ups and it ultimately didn't phase them because of the lack of serious competition and phenomenal market growth.

Apple's position is entirely about stealing marketshare instead of growing the markets. That's very, very difficult to do with intelligent, VERY rich competition. They'll have the odd success here and there, the stock will fluctuate wildly, but in the end Apple vs Microsoft is like AMD vs Intel. There was a time not too long ago where most tech geeks would drool over buying AMD stock. After all, they kept stealing marketshare from Intel for quite some time...and now look what happened.

Anyone who invests in tech stocks is gambling more than usual with their stocks. Anyone who invests in tech stocks that have most of their share value in expected growth and expected earnings rather than real ones is a ballsy gambler.

But like all gambling, you need to know when to quit while you're ahead. What makes the stock market great is when a sizable part of the market starts to panic with a stock, the rest follows suit. Which is why Apple has been in decline a month now.

[notyoueither]

Originally posted by snoopy369
That was directed to Asher.

Do you know how Shorts work, NYE? In a short, you get the money now, and then have to buy the stock later ... doesn't matter if others are bankrupt, that just helps you.

The trading companies that are holding your funds still have to be there, or you are SOL.

[snoopy369]

Originally posted by notyoueither


The trading companies that are holding your funds still have to be there, or you are SOL.

First off, there's no reasonable way that Schwab or any of the 'major' brokerages could go under that badly; in some of them you can even have your money in FDIC insured accounts. Secondly, you can just withdraw the funds... you have to have enough to cover your margin in your account, but if they're going under you can't really be held to that either

[snoopy369]

Originally posted by Asher
There are huge differences between MSFT in the 90s and Apple now. Mainly MSFT had no competition. Apple was a joke. Also mainly that the market was not mature like it is now. MS could, and did, make serious ****ups and it ultimately didn't phase them because of the lack of serious competition and phenomenal market growth.

In the late 1980s/early 1990s, that's absolutely not true. Apple still had a meaningful marketshare (the educational market by itself was pretty big, and was entirely apple's at the time), Sun and several other companies dominated the mainframe/server market, and Microsoft just made MS-DOS and a few fledgling pieces of software like Word and Multiplan that had very small portions of the market at the time.

In the mid 1990s, that was beginning to no longer be true - Apple had lost, and MS started to make significant headway in the more profitable business/server market - but they still were by no means without competition.

Apple's position is entirely about stealing marketshare instead of growing the markets. That's very, very difficult to do with intelligent, VERY rich competition. They'll have the odd success here and there, the stock will fluctuate wildly, but in the end Apple vs Microsoft is like AMD vs Intel. There was a time not too long ago where most tech geeks would drool over buying AMD stock. After all, they kept stealing marketshare from Intel for quite some time...and now look what happened.

Apple created the mp3 player market essentially by itself, and continues to lead the mp3 player market by a significant margin. Nobody would argue that the Mac is a significant marketshare, but iPod and iTunes are significant growth markets - still - where Apple is very much the giant leader.

Anyone who invests in tech stocks is gambling more than usual with their stocks. Anyone who invests in tech stocks that have most of their share value in expected growth and expected earnings rather than real ones is a ballsy gambler.

But like all gambling, you need to know when to quit while you're ahead. What makes the stock market great is when a sizable part of the market starts to panic with a stock, the rest follows suit. Which is why Apple has been in decline a month now.

Absolutely... and you'd presumably not argue with the logical corollary to that latter paragraph, right? That the price that the stock falls to once a 'panic' strikes is below its "reasonable" level, then eventually correcting back up to the 'reasonable' level again (reasonable p/e based on the consensus opinion on future earnings, of course)?

[notyoueither]

Originally posted by snoopy369


First off, there's no reasonable way that Schwab or any of the 'major' brokerages could go under that badly; in some of them you can even have your money in FDIC insured accounts. Secondly, you can just withdraw the funds... you have to have enough to cover your margin in your account, but if they're going under you can't really be held to that either

OK. Have fun trading.

[Imran Siddiqui]

Not sure where to put there, so it'll go here:

http://biz.yahoo.com/ap/080124/earns_microsoft.html

Microsoft 2Q Profit Tops Expectations

Thursday January 24, 6:28 pm ET

By Jessica Mintz, AP Technology Writer

Microsoft 2Q Profit Up 79 Percent, Helped by Windows Sales

SEATTLE (AP) -- Microsoft Corp. said Thursday its fiscal second-quarter profit topped analysts' expectations and climbed 79 percent, buoyed by rising sales of Windows-based personal computers.

For the quarter ended Dec. 31, profit increased to $4.71 billion, or 50 cents per share, from $2.63 billion, or 26 cents per share last year.

Analysts polled by Thomson Financial had forecast a profit of 46 cents per share.

Revenue rose 31 percent to $16.37 billion from $12.5 billion in the year-ago quarter, ahead of the analysts' prediction of $15.95 billion in sales.

"It looks like a very nice report, said Sarah Friar, an analyst for Goldman Sachs, in an interview. She pointed to Microsoft's improved profitability, due to better-than-expected results in two high-margin areas, software for businesses and Xbox 360s.

The quarter looked particularly good compared with the same period a year earlier, when the software maker deferred more than $1 billion in revenue due to delays in getting Windows Vista to consumers.

Microsoft's client division, responsible for Vista, posted revenue of $4.34 billion. The company said it has sold 100 million copies of Vista since its January 2007 launch.

The business division, which includes Office, brought in $4.81 billion in sales.

Worldwide PC sales in the second quarter -- 13.1 percent compared with last year, according to research group Gartner Inc., better than Microsoft's forecast for 10 to 12 percent -- helped both divisions.

Sales from the division responsible for the Xbox 360 game console and the Zune digital media player edged up 3 percent to $3.06 billion. But the division swung to a profit of $357 million from a loss of $302 million last year, and Microsoft said the division is still on track to be profitable in fiscal 2008.

Revenue from Microsoft's online services business, comprised mainly of online advertising sales, rose 38 percent, but the division widened its loss in the quarter to $245 million, from $118 million a year ago, dragged down in part by its acquisition of online ad business aQuantive Inc.

Troubles in the U.S. economy have not affected earnings in the tech sector overall. But Chief Financial Officer Chris Liddell said Microsoft isn't immune to a possible recession.

"We will be impacted just like everybody else," Liddell said in an interview. But Microsoft is optimistic about the second half of fiscal 2008, he said, noting that more than 60 percent of its revenue came from outside the U.S.

Friar, the analyst, warned that economic pressure is pushing corporations to budget less for information technology in 2008.

Microsoft's guidance for the coming year matched Wall Street's view. For the fiscal third quarter, which ends March 31, Microsoft said it expects to earn 43 to 45 cents per share on $14.3 to $14.6 billion in revenue.

For the full year, it raised its guidance and now predicts a profit of $1.85 to $1.88 per share on sales of $59.9 to $60.5 billion. Earlier, the company forecast earnings of $1.78 to $1.81 per share on $58.8 billion to $59.7 billion in sales.

Wall Street expects earnings of $1.81 per share on sales of $59.34 billion for the year and a profit of 44 cents per share on $14.43 billion in revenue for the third quarter.

Shares of Microsoft rose $1.54, more than 4.5 percent, in extended trading, after gaining $1.32, or 4 percent, to close the regular session at $33.25.

[Asher]

Originally posted by snoopy369
In the late 1980s/early 1990s, that's absolutely not true. Apple still had a meaningful marketshare (the educational market by itself was pretty big, and was entirely apple's at the time), Sun and several other companies dominated the mainframe/server market, and Microsoft just made MS-DOS and a few fledgling pieces of software like Word and Multiplan that had very small portions of the market at the time.

Was MS' P/E really around 100 in the late 80s?

Apple created the mp3 player market essentially by itself, and continues to lead the mp3 player market by a significant margin. Nobody would argue that the Mac is a significant marketshare, but iPod and iTunes are significant growth markets - still - where Apple is very much the giant leader.

Actually, if you'd look at the quarterly reports, iPod sales are stagnating and were under estimates for the quarter. Further, the MP3 market is a commodity relatively low-margin, low-revenue market. It's not enough to overvalue the stock the way that it has, particularly with stunted iPod growth...

Absolutely... and you'd presumably not argue with the logical corollary to that latter paragraph, right? That the price that the stock falls to once a 'panic' strikes is below its "reasonable" level, then eventually correcting back up to the 'reasonable' level again (reasonable p/e based on the consensus opinion on future earnings, of course)?

How do you figure overreaction is a logical corollary? It might dip below, but I don't see that as a guarantee. It certainly hasn't reached undervaluation yet in any case.

[Asher]

Originally posted by Imran Siddiqui
Not sure where to put there, so it'll go here:

Shocking, isn't it. Listening to Agathon I'd heard Vista wasn't selling and everyone was buying computers with XP on them. And XP also sucked.



And despite general market woes, recession fears, etc -- MS has raised its forecasts. Yet Drogue and Agathon insist the whole market is suffering, when clearly this is false...

[vovan]

Originally posted by Asher
And despite general market woes, recession fears, etc -- MS has raised its forecasts. Yet Drogue and Agathon insist the whole market is suffering, when clearly this is false...

Clearly. The fact that MS is down ~10% since mid-December is simply due to some idiots undervaluing it.