7 ms·

That's half the story. Apple makes ~10% more this year than last year, but it's more than 2x as valuable as it was a year ago today. The other half of the stor

That's half the story. Apple makes ~10% more this year than last year, but it's more than 2x as valuable as it was a year ago today. The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%.

ianai 6y ago
Yes, I seriously question whether their business in the whole has doubled in that year. Ie twice the revenue and profit, etc.
- pyrrhotech 6y ago
  No need to question that, it clearly has not: https://finance.yahoo.com/quote/AAPL/financials?p=AAPL https://finance.yahoo.com/quote/AAPL/financials?p=AAPL It's just more in favor now than it was a year ago in investor sentiment
  - ianai 6y ago
    I think it’s just a group dynamic pushing this stock up buoyed by developments like Apple silicon.
- wmab 6y ago
  Agreed, that's correct for public market prices in general. I'm not commenting on the valuation of the business, merely the business model that "succeeded" (one definition is valuation). I would have said the same 2 years ago when they hit 1T.
  - ianai 6y ago
    Right. They’re clearly not an income stock based on their dividend. They’re a heavily weighted future value stock. (Basically a tech stock but wonder whether there’s a more general term?)
- JaakkoP 6y ago
  That's not what's most relevant when talking about a company valuation though. A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
  - scarmig 6y ago
    > A better question would be whether the expected value of all future cash flows has doubled. In real dollars, or nominal dollars?
  - ekianjo 6y ago
    > A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question) It's rather than all other investments are worse, not that this one is real.
  - take_a_breath 6y ago
    ==A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so.== If there is a finite limit of "investable assets", then the relationship between those assets prices is not necessarily driven solely by sentiment in favor of Apple. It could be that almost all other assets have seen their expected future cash flows fall while Apple's has slightly risen. It could be that people's decision is not driven by future cash flows, but some other metric or feeling. Have Tesla's expected future cash flows increased by 8.6X in the past 12 months? It's stock has gone from $220/share to $1,900/share.
    - ianai 6y ago
      Right. It’s clearly hard to brass tacks a valuation of a 2T company, but one had better be forthcoming of even questionable quality. If no one else then Apple has a vested interest in knowing how close this valuation is to their internal knowledge. If they’re under then they could consider growing to the new valuation with opportunities otherwise unavailable outside this valuation. They could issue even more debt or offerings and go on a buying spree. Nvidia has a valuation of 300B (though probably also high relative to fundamentals). They could buy nvidia and own the future of the ML/AI market as well as the gaming market they’ve typically been shut out from competing. Toyota’s more like 190B. They could buy Toyota and immediately be one of the top auto manufacturers. They could probably do this an embarrassingly large number of times for many industries at this valuation.
devy 6y ago
> The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%. Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the side effects[1] are going to be serious concerns now. [1]: https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_side-effects https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_...
- JMTQp8lwXL 6y ago
  Even with all the stimulus and lowered lending rates, today's PE ratios were dwarfed by the dot-com bubble. We're at 31, max was 44. https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe
  - judge2020 6y ago
    A fun outlier is Tesla :) > PE Ratio (TTM) 984.55 https://finance.yahoo.com/quote/TSLA https://finance.yahoo.com/quote/TSLA
    - MichaelDickens 6y ago
      If you want to look at individual companies, there were lots of publicly-traded companies in 1999 that not only had negative earnings, but didn't even have revenue.
      - debian3 6y ago
        Like NKLA? With a market cap of $16B
      - owyn 6y ago
        Ha yes I worked for a company that went public in 1996 with approx 75k of revenue for the previous year.
  - cm2187 6y ago
    But I'd argue the economic forecasts look a lot more bleak than in 1999.
markus_zhang 6y ago
And these days MSFT, FB, AAPL, AMZN and GOOG have about 20% of capitalization of SP500. I'm sure there are a lot of mega funds who have exposure to these stocks and they do not want them to fall (until they can dump on someone else I guess).
safog 6y ago
You can compare that with other big tech. It's not just ERP or Revenue growth, the stock is just in a bubble.
abc_lisper 6y ago
That money is made from services. Profits from services has a higher P/E ratio than hardware traditionally.
lmilcin 6y ago
Valuation is a result of demand for Apple stock. There is no direct link between increase in earnings and increase of demand for stock. Increase of demand might be result of external factors, for example, people flocking to Apple safe harbor, without necessarily inherently increasing trust in Apple as business. A relatively small increase in earnings might also cause outsize increase in valuation, if that increase was not expected or if it signals to the market the company is strong regardless of tumultuous market situation.

ianai 6y ago

Yes, I seriously question whether their business in the whole has doubled in that year. Ie twice the revenue and profit, etc.

pyrrhotech 6y ago
No need to question that, it clearly has not: https://finance.yahoo.com/quote/AAPL/financials?p=AAPL https://finance.yahoo.com/quote/AAPL/financials?p=AAPL It's just more in favor now than it was a year ago in investor sentiment
- ianai 6y ago
  I think it’s just a group dynamic pushing this stock up buoyed by developments like Apple silicon.
wmab 6y ago
Agreed, that's correct for public market prices in general. I'm not commenting on the valuation of the business, merely the business model that "succeeded" (one definition is valuation). I would have said the same 2 years ago when they hit 1T.
- ianai 6y ago
  Right. They’re clearly not an income stock based on their dividend. They’re a heavily weighted future value stock. (Basically a tech stock but wonder whether there’s a more general term?)
JaakkoP 6y ago
That's not what's most relevant when talking about a company valuation though. A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
- scarmig 6y ago
  > A better question would be whether the expected value of all future cash flows has doubled. In real dollars, or nominal dollars?
- ekianjo 6y ago
  > A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question) It's rather than all other investments are worse, not that this one is real.
- take_a_breath 6y ago
  ==A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so.== If there is a finite limit of "investable assets", then the relationship between those assets prices is not necessarily driven solely by sentiment in favor of Apple. It could be that almost all other assets have seen their expected future cash flows fall while Apple's has slightly risen. It could be that people's decision is not driven by future cash flows, but some other metric or feeling. Have Tesla's expected future cash flows increased by 8.6X in the past 12 months? It's stock has gone from $220/share to $1,900/share.
  - ianai 6y ago
    Right. It’s clearly hard to brass tacks a valuation of a 2T company, but one had better be forthcoming of even questionable quality. If no one else then Apple has a vested interest in knowing how close this valuation is to their internal knowledge. If they’re under then they could consider growing to the new valuation with opportunities otherwise unavailable outside this valuation. They could issue even more debt or offerings and go on a buying spree. Nvidia has a valuation of 300B (though probably also high relative to fundamentals). They could buy nvidia and own the future of the ML/AI market as well as the gaming market they’ve typically been shut out from competing. Toyota’s more like 190B. They could buy Toyota and immediately be one of the top auto manufacturers. They could probably do this an embarrassingly large number of times for many industries at this valuation.

devy 6y ago

> The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%. Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the side effects[1] are going to be serious concerns now. [1]: https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_side-effects https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_...

JMTQp8lwXL 6y ago
Even with all the stimulus and lowered lending rates, today's PE ratios were dwarfed by the dot-com bubble. We're at 31, max was 44. https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe
- judge2020 6y ago
  A fun outlier is Tesla :) > PE Ratio (TTM) 984.55 https://finance.yahoo.com/quote/TSLA https://finance.yahoo.com/quote/TSLA
  - MichaelDickens 6y ago
    If you want to look at individual companies, there were lots of publicly-traded companies in 1999 that not only had negative earnings, but didn't even have revenue.
    - debian3 6y ago
      Like NKLA? With a market cap of $16B
    - owyn 6y ago
      Ha yes I worked for a company that went public in 1996 with approx 75k of revenue for the previous year.
- cm2187 6y ago
  But I'd argue the economic forecasts look a lot more bleak than in 1999.

markus_zhang 6y ago

And these days MSFT, FB, AAPL, AMZN and GOOG have about 20% of capitalization of SP500. I'm sure there are a lot of mega funds who have exposure to these stocks and they do not want them to fall (until they can dump on someone else I guess).

safog 6y ago

You can compare that with other big tech. It's not just ERP or Revenue growth, the stock is just in a bubble.

abc_lisper 6y ago

That money is made from services. Profits from services has a higher P/E ratio than hardware traditionally.

lmilcin 6y ago

Valuation is a result of demand for Apple stock. There is no direct link between increase in earnings and increase of demand for stock. Increase of demand might be result of external factors, for example, people flocking to Apple safe harbor, without necessarily inherently increasing trust in Apple as business. A relatively small increase in earnings might also cause outsize increase in valuation, if that increase was not expected or if it signals to the market the company is strong regardless of tumultuous market situation.