Tuesday, March 29, 2011

My very first Apple estimate

A few weeks ago I stumbled into the old The Motley Fool board for AAPL, and was surprised to see them open without subscription. My recollection from about 10 years ago was that they had gone to a paid subscription model, and thus I had abandoned them for good and never looked back in these 10 years (nothing against the Gardner bros. investment style but wasn't a fan of their constant spamming for their newsletters).

So it seems at some point in the last 10 years they decided to go with a freemium model. Anyway, as I was reading some of the posts, I think I recognized some of the old nicks from way back then. I got curious and decided to search for my old posts. Couldn't find them on a first try, but then I tried an alternate nick I used and there I was, in full 10-years-younger and slightly snarky-er glory, trying to be all witty and all that. (Ah, the old interwebs... hasn't changed one bit from the usenet days, it seems. Or rather, people haven't changed.)

So, here's my very first post ever on an AAPL board, and to my surprise (seriously), it's an EPS estimate:

Recipe for a killer Q2 2001

And, as it turned out, I nailed it to the penny! Although for the next quarter I was 6 cents too high (back then that amounted to a 35% error), my analysis of the media coverage is classic (reminds me of half the discussions today). For Q4 2001 I was off by a penny, and then boards.fool.com was shut. I don't remember publicly posting any more estimates until at least 2003 or 2004 in the infamous Yahoo! AAPL board.

2001 was an incredibly transformational year for Apple. iTunes, TiPB G4, Mac OS X, Apple Retail Stores, iPod. It's quite insightful to look in hindsight at their long-term strategic positioning back then, its flawless implementation and execution over the following 10 years, and the fruits reaped in the last 5 or so. Their financial analyst meeting on January 31, 2001 where Jobs laid out his "digital hub" strategy was a rare peek at their amazing vision. It's a shame that there isn't a recording or transcript of it somewhere in the internet anymore.

In this past decade Apple has grown revenues 20-fold from $5b (FY01) to over $100b (FY11 estimate), and earnings from zero (or losses) to $25b (FY11 est.). The stock went from around $10 to $350, and it still hasn't caught up with Apple's performance. I consider myself fortunate to have been around back then, watching, hearing, reading, analyzing, and investing in that vision. Wish I had done more (as I easily could) but I won't complain.

AAPL 10-year chart (click to enlarge)


PS: My second post there is in my classic "trolling" style (don't use it much anymore). Further reading the thread, I was quite impressed to read myself in a response to the replies to my flame-bait, conceptually arguing and wishing for the iPad revolution:
Why do you think the TV and the radio are present in every household, and the computer doesn't even reach half of them? And that's only in America. Even the 3rd world is saturated with TVs, but the computer's penetration is less than 5% in some places. Think about it. It's not a dumbed-down interface that I'm asking for. Think of iMovie.
What a blast from the past to re-encounter my smart-ass self from 10 years ago.


Dennis Hildebrand said...

Very interesting AND funny Daniel... That had to have been fun to find this stuff that you were passionately writing about 10 yrs ago - as you do now....


Dennis Hildebrand said...

Very interesting AND funny Daniel... That had to have been fun to find this stuff that you were passionately writing about 10 yrs ago - as you do now....


Dennis Hildebrand said...

sorry about the double ...

vk said...

Daniel: Good work.

Is there a reliable graph of historical P/E ratios for Apple going back to 2000-2001 ? It will be interesting to see how much the market foresaw Apple's growth and when.


Daniel Tello said...

Chandra, there's this site with charts of PE and PS and a whole bunch of others, going back to 2001.

Some brief periods had very low or negative EPS so the P/E then is meaningless. Perhaps a P/E ex-cash could be derived. I remember AAPL traded at cash level for a few days at the lowest lows near $6 in Apr 2003 right before the iTunes Music Store launched.

vk said...

Thanks Deagol. That P/E ratio charts tell a lot. As I have wrote here before, the P/E ratios tend to shrink as the market cap of a growth company increases. And I am astounded that, more or less, that trend is holding from 2003. With a 40-50% grower like Apple, to keep at this P/E level ( let alone increase ), the price has to increase at 40-50% level. Somehow I do not see the market psychology allowing for that. So the probability is much higher for a further P/E compression than for a P/E expansion. Even with such a P/E compression, Apple can still outperform the indices, so it makes sense to buy apple here rather than invest in the market as a whole.

JavaJack said...

What do you think of the Nasdaq re-balance? Seems like another punch in the gut for Apple. I don't like how Android is winning so many users on their phone platform diminishing Apple's market share. I'm surprised given all the developer negativity re the Android app development.

Al velasco said...


You crack me up with you history following Apple and your predictions. With your knowledge of Apple, I thought I'd ask you a question relating to one of their more recent investments.

Apple bought the rights to Liquidmetal in consumer electronics. The agreement looks like Apple paid a one time fee in exchange for these rights. I was wondering if you think a company with a revolutionary technology like Liquidmetal would also get a contract to act as a supplier of the Liquidmetal alloy or if you think Apple would use outside companies to provide the alloys and Apple would just mix them. I am invested in LQMT and could use your thoughts.

Al. Al.Velasco@me.com

Daniel Tello said...

javajack, re-balance is a short term thing IMO already behind us. Android (noise of war is a red-herring) may even be helpful (see asymco).

Al, I have no idea. There's not much info on LQMT, and I did reply to your previous question with what I could find here. Good luck!