4 ms·

It boils down to opportunity cost, established in the cost of capital. Apple is valued at $1T and all the nice things that come along with that (huge salaries)

It boils down to opportunity cost, established in the cost of capital. Apple is valued at $1T and all the nice things that come along with that (huge salaries) only if they deliver growth. It's 100% fine to not have growth, but then they have to get a different set of investors (or buy themselves out) etc. where those expectations are different. With 0% growth their equity price is near 0. Which is again, fine, if those are the terms being made. But it means less money for speculation, investment, R&D, expansion etc.. Every investor is allocating capital based on the opportunities in front of them. If some other team can consistently do better, well, money will follow that. To a great extent - we want this. Usually corporate growth means 'surplus' for the rest of the economy and especially consumers. For every $1 in APPL profits, probably they have created more than that in surpluses. In other words: our lives are materially improving, specifically by more than we are giving apple as consumers. Hopefully. These economics don't always work well, esp. when there are monopolies or for where economics work differently, like healthcare. (FYI capitalism and certain fundamental realities exist in Healthcare, just that the context is different). It remains to be seen if Apple will find other ways to grow, my bet is they are not out of tricks just yet.

kgwgk 4y ago
> With 0% growth their equity price is near 0. Oh. My. God.
- jollybean 4y ago
  Yes, that's how it works. How much would you pay for something that has X% (where X > 0) risk, and 0% growth? You would likely pay $0. Because you can put your money in a 'risk free' investment, like a bank account, and get a minimum return. There is the 'enterprise value' which would include assets (i.e. maybe Apple has $20T in cash in which case, obviously their stock is worth whatever their assets are worth, but at some risk-premium discount). Most companies have some assets but usually not a ton relative to their value. Of course, 'risk free rate' may be negative (not common, but could happen), and so 'losing money' on a stock that doesn't grow would be better than keeping it under your mattress or in the bank, but we're not there yet. But otherwise, a company that doesn't grow is fairly worthless to most investors other than for some other strategic logic, because they usually have other, better places to put their money.
  - harperlee 4y ago
    > How much would you pay for something that has X% (where X > 0) risk, and 0% growth? Surely at least book value, in case that risk is not infinite? > a company that doesn't grow is fairly worthless to most investors other than for some other strategic logic, because they usually have other, better places to put their money. A company is a money making machine. If it doesnt work it produces each year the same amount of money. How can that be worthless?
  - kgwgk 4y ago
    You seem a lost cause, but for the benefit of bystanders I'll just clarify that zero growth doesn't mean zero return. A non-growing company with annual profits around $100bn is obviously worth much more than $0.
    - astrange 4y ago
      What's the point in buying shares of a company with no possible upside? That's not a useful product for a retail investor, and it's not usable for stock compensation for employees either.
      - yazaddaruvala 4y ago
        In this example by the parent commenter the $100 BB divided up as dividends or stock buy backs is useful regardless of y/y revenue or profit growth.
        astrange 4y ago
        That's not useful to a retail investor though. You know its exact value and so does whoever's selling it to you, meaning you can't get a bargain on it. It might be useful if you got it for free, but in that case you should sell it to a bank or someone who can actually use a fixed-income asset.
        kgwgk 4y ago
mcphage 4y ago
> With 0% growth their equity price is near 0. Which is again, fine, if those are the terms being made. > But it means less money for speculation, investment, R&D, expansion etc.. Well, they're still making billions in profits. Their stock price won't affect that.

kgwgk 4y ago

> With 0% growth their equity price is near 0. Oh. My. God.

jollybean 4y ago
Yes, that's how it works. How much would you pay for something that has X% (where X > 0) risk, and 0% growth? You would likely pay $0. Because you can put your money in a 'risk free' investment, like a bank account, and get a minimum return. There is the 'enterprise value' which would include assets (i.e. maybe Apple has $20T in cash in which case, obviously their stock is worth whatever their assets are worth, but at some risk-premium discount). Most companies have some assets but usually not a ton relative to their value. Of course, 'risk free rate' may be negative (not common, but could happen), and so 'losing money' on a stock that doesn't grow would be better than keeping it under your mattress or in the bank, but we're not there yet. But otherwise, a company that doesn't grow is fairly worthless to most investors other than for some other strategic logic, because they usually have other, better places to put their money.
- harperlee 4y ago
  > How much would you pay for something that has X% (where X > 0) risk, and 0% growth? Surely at least book value, in case that risk is not infinite? > a company that doesn't grow is fairly worthless to most investors other than for some other strategic logic, because they usually have other, better places to put their money. A company is a money making machine. If it doesnt work it produces each year the same amount of money. How can that be worthless?
- kgwgk 4y ago
  You seem a lost cause, but for the benefit of bystanders I'll just clarify that zero growth doesn't mean zero return. A non-growing company with annual profits around $100bn is obviously worth much more than $0.
  - astrange 4y ago
    What's the point in buying shares of a company with no possible upside? That's not a useful product for a retail investor, and it's not usable for stock compensation for employees either.
    - yazaddaruvala 4y ago
      In this example by the parent commenter the $100 BB divided up as dividends or stock buy backs is useful regardless of y/y revenue or profit growth.
      - astrange 4y ago
        That's not useful to a retail investor though. You know its exact value and so does whoever's selling it to you, meaning you can't get a bargain on it. It might be useful if you got it for free, but in that case you should sell it to a bank or someone who can actually use a fixed-income asset.
        kgwgk 4y ago

mcphage 4y ago

> With 0% growth their equity price is near 0. Which is again, fine, if those are the terms being made. > But it means less money for speculation, investment, R&D, expansion etc.. Well, they're still making billions in profits. Their stock price won't affect that.