Here's to the crazy ones

Here's to the crazy ones.

   The misfits.
    The rebels.
     The troublemakers.
      The round pegs in the square holes.
The ones who see things differently.

Apple at record high yet cheap as ever

Ok maybe not as cheap as in 2003...

Still, despite the 20%+, 64+ point run in less than a month to a record all-time intraday high today of $374.65, those buying AAPL at that price are still getting it at a near-record low (recent years) valuation multiple of only 10.8 times my forward-looking EPS estimate (8.6x after excluding cash).

Fiscal 3Q 2011 Final Estimates

3mo ending Jun-2011   Rev($M)   EPS($)
-------------------   -------   ------
Apple guidance         23,000     5.03
Analysts consensus     24,920     5.80
Deagol estimates       26,070     6.62

Get AAPL for free - yet another opinionated valuation analysis

These days there's been endless discussion about AAPL valuation, some as usual focused on Apple and its perceived risks, some scolding everyone for even talking about valuation as it's "evidently" irrelevant, and more recently some more focused on market mechanics and manipulation. There's evidence and theory and some data to back almost any combination of reasons, be that pro or con any specific issue. Precisely because of this, most points of view end up being opinion based. I won't even point you to any article as there's been too many and I don't want to bias your research by picking my favorites (check on the list of links at the right for some of them). Or just Google "AAPL valuation" and filter by "last month" with the search tools on Google's left panel.

So here, to add my take to the "AAPL valuation is nuts" opinionated pool, I've chosen to do it without addressing any of the common issues. Yup, you read that right. I won't talk about management uncertainty or competitive forces or the broader economy or sentiment or market manipulation. There's plenty on all of that elsewhere, and usually (if you're good at parsing trolls) insightful and exhaustive discussion through those articles' comment systems.

Pro analysts' "lazy eye" - charted

Sorry for taking so long to post about Apple's fiscal 2Q 2011 results. By now everyone surely has all their answers, so I'll keep it short (and you can get the gritty details in the tables below). Compared to my estimates, a huge iPad miss ($1.6b) partly offset by iPhone upside ($1.1b), among lesser effects, resulted in almost $600m revenue miss. All of it was made up through lower costs hitting operating income within 0.2%, and nailing pre-tax income. Slightly lower tax rate and share dilution than expected resulted in EPS 8 cents (1.2%) higher than expected. All margin ratios were slightly better than expected. Revenue guidance roughly inline but EPS guidance significantly higher than expected, which suggests continued high margins. Here's all the details:

Which analysts are the biggest sandbaggers - charted

Over the past year or so I've been tracking all of us analyst performance in forecasting Apple's financial metrics, and ranking us based on the 6 or 7 categories of estimates compiled by Fortune's Apple 2.0 blogger Philip Elmer-DeWitt, and the outcome has always been a consistent underperformance by pros (see here, here, here and here). The comparison and friendly "competition" has almost become laughable, if it weren't for the serious amount of capital that these "professional" analysts look over, and thus the effect of their cluelessness on Apple's share price gets felt.

However, all this time I've been applying a somewhat forgiving methodology on my rankings. By averaging out all the categories with equal weights, the resulting score improperly reflects the relative importance and sensitivity on the stock price of these variables. It should be clear to all investors that forecasting earnings and revenue is most critical, while the number of iPods sold has very little effect (for quite a few years now) on Apple's financial performance. Yet by applying the same weight to these, the effect of the most important metrics gets watered-down by the less important ones so the analyst scores and thus the rankings do not reflect what investors should be focusing on out of all the stuff analysts throw out there.