The place João Bordalo calls home: 10 reasons to invest in Apple

10 reasons to invest in Apple

bordalix — Tue, 28 Aug 2007 11:20:00 -0500

Everyone is talking about stock, housing and credit markets, the next bubble/depression, you name it. With people asking, I have decided to compile the 10 reasons why I invested in Apple stock, and sincerely, why I don't give a damn about all the bad news. So, here are the 10 good reasons to invest in Apple stock:

Apple's market share as a computer maker is on a strong up-trend. Is now 17.6 percent of the market, and pushed Apple to number 3 in the list of PC makers. Apple laptops and desktops have the "cool factor" that other brands just can't match (with the possible exception of Sony), and they are greatly popular with students and teenagers. A new generation of users (and spenders) is growing accustomed to Apple's operating system, with a strong feeling that Windows is lame.
Apple dominates the Mp3 player market, with a market share higher than 85%. The domination is global, not just in the USA. Think Europe, Japan, China, Australia, South America. Every single wealthy teenager on the planet owns or wants to own an ipod. The language changed, even if you are talking about a competition's product, you call it an iPod. And there is no competition on sight.
Apple retail stores are the best performing stores in the USA: it generates 4.032 USD per square foot per year. Why? Just walk in an Apple store, then compare it to any other possible high tech shopping experience: you will get the answer. Only a handful of stores are outside the USA. So, there's a lot of growth space for the company: new stores are coming in Germany, France, Italy and other wealthy countries. Here in Portugal, people is waiting for ages...
Apple dominates the music download industry. It's probably the only company in the world that is still making real money on music, with iTunes Music Store reaching the 3 billions songs sold last July. Everybody knows that Mp3 players worldwide are stuffed with illegally downloaded songs, but still, a percentage of those songs are payed for and Apple has a huge market share of the business.
With iTunes and Apple TV, Apple is set to be a front runner in the movie download business. It's the future, believe it or not. Maybe not tomorrow morning, but soon. The cost, speed and ease of use of downloading a movie and watching it on your TV is a killer advantage for the customer. The only block to this business are the big studios, but even they will have to adapt. Just wait.
Apple software is simply better. Look at how Vista has been greeted by users, it's almost a joke. And the best features are "apple looking". The operating system market is "viral": the more users run an operating system, the more likely other users will hear about it, experience it, choose it as a new standard. That's why Leopard is going to be a huge hit, boosted by the "halo effect" of booming laptop and desktop sales. And slowly, Apple is going to sneak in the corporate market. Yes, they all use Windows. And yes, a fax machine looked like the coolest thing around just a bunch of years ago.
Apple is targeting the upper level consumer, the people that spend extra cash to get the best design and the "identity" effect of owning a gadget with a brand. Apple controls the entire process for the entire product: software and hardware, production and sale. This translates in better margins all down the line.
The company is as strong as hell. P/E ratio at 37 might seem high, but it's pretty normal if compared to others (RIMM 63, GOOG 41, AMZN 109, YHOO 45). Dell, Hp and Microsoft have a lower P/E, but lower revenue growth expectations. Plus, Apple has a load of cash and zero debt.
And.. oh.. there's the Iphone. The Iphone is going for sale in the rest of the world in the next 12 months. And people here in europe are waiting for it like you await a messiah, not a piece of hardware. The proof? Apple is the only phone maker in history that gets a bite of revenue from the phone companies. That's extra cash, at no additional cost for Apple.
One more thing... Apple is the only company with the ability to disrupt the market. The focus on detail, the strong control on every step of the production phases, the huge investment in research, design and marketing make Apple a company with a huge future potencial. I put my money in.

"10 reasons to invest in Apple" by Bruno Rodrigues

Wed, 29 Aug 2007 07:01:41 -0500

Disclaimer: I work at a huge telco. Windows Mobile is the same as windows on the PC - something to be far away, both on the technology side (who cares how "open" it is when it's so broken) and specially from its vendor. I'm glad most telcos *hate* microsoft so much, mainly because opcos are smart enough to not be fracked up by microsoft (maybe because telcos are so used to also frack others). The iPhone is the perfect device for a specific market niche. It's the device that no operator and no mobile vendor could ever do. Apple knows that and takes advantage by demanding too much from the opcos. BTW, real smart people use Symbian (or RIM in specific cases), never Windows. And don't even get me started on the software. iTunes runs on Mac and Windows. Where's the WIndows mobile software for the mac?

"10 reasons to invest in Apple" by João Barros

Wed, 29 Aug 2007 06:25:30 -0500

First of all, good post. I guess we could consider Apple as an overall good target for investment, as it is kinda solid and growing its share of the market. But it's still a tech stock, with all the risks around it. Maybe it's easy for us, involved in the tech market, to try and guess the evolution of such type of companies, but i wouldn't point it as an excellent target for investment. About the iPhone, i still think it's more like a "status" phone than somethink worth having for people working in a technology environment. You may say Windows devices are crappy, but they have years of evolution, and a LOT more software developed for people who really need it for work (and no, we don't only need an agenda and contact list). And btw.. where are the custom ringtones? Where is the voice recognition dialing? Why do i have to put up with iTunes??? (wasn't imposing software the microsoft way of doing business?) Where is audio streaming from the web? Why there isn't any audio link between the bluetooth capabilities and the audio playback? Where is the video recording?? Where is the FLASH support in mobile safari? Where are the 3rd party applications? Yes Bruno, i think of the evolution of iPod... but there's still a LONG way for the iPhone to go...

"10 reasons to invest in Apple" by Bruno Rodrigues

Tue, 28 Aug 2007 18:47:03 -0500

@nobody: How can someone compare the iPhone with a crappy windows device? even though the iPhone is still miles away from any proper device (read SonyEricsson, Nokia, and many others), mostly because it's Apple's first device and they want to make sure that what they do is done properly (and thus the rest will come in the next devices, read 3G++), windows devices are many more miles away. Who cares about windows mobile devices besides windows nerds? And besides, if Apple would get 20% (which is next to impossible, think the bigger is Nokia and has 36%), it would be huge. And besides, who told you that *that* device is the one for Europe for November? Just think about the evolution of the iPods. I fully agree with João. I have no clue about stocks (I truly hate the concept), but Apple still has much more to give us - iPhone 3G europe, Apple TV evolution, etc.

"10 reasons to invest in Apple" by Finance Nerd

Tue, 28 Aug 2007 16:44:22 -0500

Your post is most interesting to read as it really does a GREAT job summarizing why Apple is such a successful company. Very well summarized. That said, in terms of Apple as an investment it would be difficult to judge whether or not it would be a good investment without looking at the respective valuation of Apple versus say Google. Yes, Google has a P/E ratio of 41 but Google's EBITDA margins are roughly 43% versus Apple's roughly 22%. In other words (and generalizing a lot), from a cash flow point-of-view a dollar of Google revenue is worth twice that of an Apple dollar of revenue. You do mention growth rates which are key of course but I would expect Google revenue to out pace Apple's over the next five years. Just a comment from the peanut gallery as I really enjoyed your post!

"10 reasons to invest in Apple" by nobody

Tue, 28 Aug 2007 16:29:56 -0500

Desculpem la, mas o iphone ja me anda a passar, o que raio tem um telefone (para alem do "cool factor" para os teenagers adoram) que não faz 1/2 do que o meu HTC TyTn faz? So para dar o exemplo de portugal, garanto-vos que o iphone nao vai vender nada(pelo meno no molde de assinatura mensal), quanto aos ipods, desculpem lá, mas tiverem 20% do mercado portugues ja axo muito...

"10 reasons to invest in Apple" by dextro

Tue, 28 Aug 2007 12:41:25 -0500

True but Jobs hasn't shown much signs of moving on from Apple lately, he keeps going strong but it's true: Apple lives a lot from its leader. Steve Jobs is Apple right now. He's involved in the design, in the development, in the marketing... Apple is a solid investment right and I think we still have quite a few years before we can question that assumption.

"10 reasons to invest in Apple" by Jenheta

Tue, 28 Aug 2007 12:30:15 -0500

I basically agree with your list but Apple has "something else" to be considered : it's iconic CEO. Many have tried to speculate what would happen to Apple without Steve Jobs but the truth is : nobody knows. Maybe the strong inertia will keep up Apple in a good position for a while but without strong leadership, Apple will (re) enter dark ages and its stocks will probably plunge.