How Low Will Apple’s Stock Go?

Hola Todos!

It’s absolutely amazing what has happened to Apple’s share price over the last six months.  From a high of $702 in September 2012 to the lower 400’s in March 2013, it’s been one wild ride.  Full disclosure: I do not own any shares of Apple or shares of any other firm for that matter.  Even fuller disclosure:  I am a marketing Ph.D. not a finance Ph.D. and sometimes Wall Street makes no sense to me whatsoever.

Case in point – Apple.  The rumormongering goes something along the lines of this:  Apple has not had a blockbuster product since Steve Jobs died and worries persist that Android/Samsung is eating into iPhone’s market share.  I believe I started this paragraph with the word rumormongering.

Apple has one of the best balance sheets in recent memory ($137 billion in cash, zero debt, $12 to $16 billion in new cash per quarter, a single-digit P/E ratio).  As for iPhone, not only did the iPhone 5 outsell Galaxy in the US and around the world, but the iPhone 4s ALSO outsold Galaxy in the US and around the world for the last quarter of 2012.  While no one seemed too excited about iPad mini (even I complained they missed the price point), Apple could not keep the device in stock during the holiday shopping season.  Over 80% of Apple’s revenue came from products released in the last 12 months.

Once again, Philip Elmer-DeWitt of the Apple 2.0 blog hit the nail on the head.  Steve Jobs was known for having a reality distortion field around him.  In this post, Philip suggests that the reality distortion field has been inverted: now everything is normal inside Apple yet people on the outside cannot grip reality.

Here is my take – the business press has been writing positive articles about Apple for so long that those articles are no longer interesting to readers anymore.  Instead, the articles that say Apple is “in big trouble,” “losing it’s cool” or “just plain doomed” attract more attention.  I’m curious to see how long business press will keep ignoring fundamentals and instead continue with rumormongering just to attract attention.  What will they do if Apple does roll out at least one or perhaps two new product lines this year?  We’ll just have to wait and see.

Something to think about today…

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, Ph.D.,

 

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

 

 

Stocks: Voting Machines or Weighting Machines?

Hola Todos!

I look for nuggets everywhere and recently, I’ve been listening to a lot of podcasts in the car.  Although there are a lot of podcast apps out there, I particularly like the Stitcher app, which conveniently organizes my favorite podcasts including the Harvard Business Review Ideacast, the Stanford University Entrepreneurial Thought Leaders, the American Marketing Association’s MarketingPower Podcast Series, the Social Media Marketing Podcast from the Social Media Examiner and The Talk Show by John Gruber.

The other day, I was listening to Amazon’s CEO Jeff Bezos on the HBR Ideacast and he was asked, “So how much do you care about your share price?”

Mr. Bezos responded, “I care very much about our share owners, and so I care very much about our long term share price. I do not follow the stock on a daily basis, and I don’t think there’s any the information in it. Benjamin Graham said, ‘In the short term, the stock market is a voting machine. In the long term, it’s a weighing machine.’ And we try to build a company that wants to be weighed and not voted upon.”

I’ve seen too many companies shoot themselves in the foot as they make short-term decisions to make their quarterly numbers look better without thinking of the long-term consequences of their actions.  I like this idea of “a weighing machine” as it connotes a long-term orientation.

Something to think about today…

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, Ph.D.,

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

 

 

 

Apple’s Stock Price: 6-to-1 Split and Headed to the DJIA?

Hola Todos!

Financially speaking, Apple has certainly earned the right to be considered for the Dow Jones Industrial Average and Paul R. La Monica of CNNmoney.com makes a solid case for Apple’s inclusion (click here).  The current tech companies on the DJIA include struggling Cisco and HP, as well as, the stronger set of IBM, Microsoft, and Intel.

One major issue that would prevent Apple from joining the DJIA is that the Dow is a price-weighted average and not a market cap-weighted index like the S&P 500 or the NASDAQ Composite.  With Apple’s share price hovering around $600, Apple would skew the Dow too much at its current price but a 6-to-1 split could rectify that.

The question remains however, does CEO Tim Cook want to steer Apple in the DJIA direction?  While there is no question that Mr. Cook is doing things a bit differently than Mr. Jobs (dividends for instance), but I have listened to Mr. Cook on a number of earnings calls and I’m not even sure I would even use the word “lukewarm” to describe his interest on this issue when probed by the analysts.

There is no question, just like Mr. Jobs, that Mr. Cook’s #1 focus is on Apple’s products and not Wall Street.  My though is unless there is a strategic reason or positioning that Apple wants to achieve, Mr. Cook will not distract Apple from its main focus: products.  And with all that is rumored on Apple’s plate for the remainder of this year (click here), Apple probably does not want to be distracted.  Moreover, Apple does one or two major things at a time, and I doubt that this is #1 or #2 over the next 6 months.

Something to think about today…

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, PhD

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

 

 

How High Will Apple’s Stock Go? Dr. Dan-o in Yahoo Finance

Hola Todos!

A journalist asked me the other day about Apple’s rising stock price and why are buyers willing to pay such a high price for Apple’s stock. The article was post on Yahoo Finance yesterday (click here).  To put it into perspective, since February 14th when Apple CEO Tim Cook came to New York City to speak at the Golman Sachs Technology Conference (click here), Apple’s stock is up over 22%, has hit 27 new highs in 31 trading days, gained nearly $110 in the 31 trading days and its market cap has grown by more than $104 billion (click here).  What’s amazing is that $104 billion is equivalent to approximately one Amazon in market cap. WOW!

My full comments to the journalist are below including Dr. Dan-o “isms” such as “you price what the market will bear” and “consumer’s are voting with their lets.”

 

Best regards

Dr. Dan-o

 

 

 

My name is Daniel M. Ladik and I am as Associate Professor of Marketing in the Stillman School of Business at Seton Hall University.  Your request was forwarded to me as my main areas of teaching and research expertise include marketing strategy and social media/Web 2.0, as well as, personal selling and sales management.  I blog at www.dignuggetville.com.  I am also an Apple aficionado – see previous Apple comments in Forbes Magazine (click here).

When I read your request, two thoughts popped into my head.  First, the most fundamental axiom in marketing theory when it comes to pricing is “You price where the market will bear.” In other words, one should set the price of a product or service at the price where the buyers believe the deal is worth taking.  Toyota does a good job in this area with their Prius cars while GM did not with their comparable Volt car that recently halted production because too many Volts are sitting on dealership lots. The Volt should be a $25,000 car (after the $7,500 government incentive).

Second, and not independent of the first, competition of comparable products have a major impact on price.  That said, for the months of October, November and December 2011, Apple sold 15 million iPads that accounted for 9.15 billion dollars or 20% of Apple’s revenue for the quarter.  The closest competitor, Amazon’s Kindle Fire priced $300 cheaper, sold less than 4 million units during this same time period. Even at $300 more, the iPad is a superior product in every way, shape or form than anything on the market.  By the way, the iPad also outsold more expensive PCs as HP, Dell, Acer nor Lenovo sold more units that iPad for the same three months.

Until competition can come close to the value equation (i.e., you get what you pay for) that iPad offers, Apple can command that premium price. You have to understand, what Apple pays to get the product made and how much margin per unit Apple earns is not relevant to consumers, just analysts. Consumers “vote” with their wallets and it does not appear price is hindering Apple in any way.  By the way, iPad 2 was already significantly better than any other tablet on the market and it is now $100 cheaper.  This was a smart move by Apple as it protects them even more from competition from below.

On a final note, pre-orders for the “new” iPad sold out worldwide in 2 days.  Apple can justify the prices of their products because the market believes they are worth every penny.

If there are any questions or clarifications on any of the thoughts above, please call my cell this afternoon or send me an email.

 

Best regards,

Dan-o

 

Daniel M. Ladik, PhD

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

daniel.ladik@shu.edu