a bit dated but....
Why everyone's afraid of Apple
By Brett Arends, WSJ.com
Last Update: 12:01 AM ET May 4, 2010
BOSTON (MarketWatch) -- Apple Inc. used to be the company that everybody loved. Now it's the company everybody fears.
Take Wall Street. It's terrified of this stock.
Fund managers are afraid not to own it. Hedge funds are afraid to bet against it. And you can sort of see why. Apple (AAPL) has repeatedly blown past forecasts and the stock has skyrocketed. The company just reported an early boom in iPad sales. Anyone who had bet the other way is already feeling it: The stock jumped again Monday to $267, near a new record. The stock, which fell Friday, bounced $5 to $266, nearing a new all-time high. Five years ago it was around $35. Read more about iPad sales.
Analysts have been cowed by Apple. Forty cover it. But according to data from Thomson Reuters, no fewer than 36 of them are bullish, rating it either a "buy" or "outperform." Just one analyst rates it as a sell.
Journalists are terrified of this company too.
Why? Just ask Jason Chen - the editor at tech blog Gizmodo who got his hands on the next iPhone. Apple's response? They sent in the police, who smashed down Chen's front door, ransacked his house -- while he was out -- and carted off computers and files. When Chen returned home from dinner with his wife, they frisked him too.
No wonder Jon Stewart at the Daily Show called the company "Appholes" and likened this to 1984. (When I emailed Chen about the incident, he said he couldn't talk.)
And everybody knows Apple's competitors have pretty much had a meltdown of Apple terror.
Rival computer makers, in awe of the iPad, have scrapped or punted tablet PCs. Websites are rewriting code because Jobs has banned Adobe Flash from the iPhone and iPad. Even Amazon.com Inc. (AMZN) is afraid. Not only does the iPad threaten the Kindle, but according to an account by Ken Auletta in the New Yorker, Apple may be willing to help publishers boycott the Kindle until Amazon agrees to stick it to the public by raising the price of e-books.
(That $9.99 e-book will now cost you $14, ma'am. Don't thank us. Thank billionaire Steve Jobs.)
Has Apple, once the Rebel Alliance, become the Evil Empire? Has Anakin Skywalker become Darth Vader?
Call me ornery. But the time to start asking really tough questions is when everyone else is too cowed to do so. And here goes.
First, has Apple risen too far?
Do the math. Apple stock is $266. And there are just under 1 billion of these shares in existence. At current prices, if you wanted to buy the entire company it would cost you about $240 billion.
To put that in context, for the same amount of money you could own Newmont Mining Corp. (NEM), the world's largest gold-mining company.
And E.I. Du Pont de Nemours & Co. (DD), the chemicals giant.
And Kellogg Co. (K), whose products appear on every breakfast table.
And Shrek studio DreamWorks Animation SKG Inc. (DWA)
And H& R Block Inc. (HRB), the company that does everybody's taxes.
And The New York Times Co. (NYT) And Molson Coors Brewing Co.(TAP)
And the Estee Lauder Cos Inc. (EL)
And Tiffany & Co. (TIF), the Hershey Co. (HSY), Harley-Davidson Inc. (HOG), Expedia Inc.(EXPE), Abercrombie & Fitch Co. (ANF), American Eagle Outfitters (AEO), Burger King Holdings Inc. (BKC), CBS Corp. (CBS), Chipotle Mexican Grill Inc. (CMG), Whole Foods Market Inc. (WFMI), Starbucks Corp. (SBUX), Netflix Inc. (NFLX), JetBlue Airways Corp. (JBLU), NStar (NST), and Dr Pepper Snapple Group Inc. (DPS)
I have no problem with paying more for Apple than for any of these companies. But for all of them put together? Seriously?
If you had $240 billion, which would you rather own?
As for all those analysts... the last time we saw that kind of cheerleading was probably among the analysts covering the homebuilders during the bubble in 2005.
Before that, it must have been the dotcoms in... early 2000.
The time to buy a stock is when everyone hates it, not when everyone owns it and is too scared to sell. (The analysts are more bullish now than they were when the stock was $100.)
Second, is Apple starting to lose some of its luster?
Getting ripped by the Daily Show's Stewart was a serious black eye. Apple's a brand company. From a figure like Stewart, this hurts.
And there was something else worrying in the Gizmodo affair.
That new iPhone? What a total meh. So what if it has new volume controls? Or a metal strip around the side? Apple needs people to line up round the block for its next product. Will this really be enough?
Occasionally, an Apple fanatic accuses me of being a long-standing bear of the stock. It's total nonsense. Just for the record, at the lows in late 2008, when Apple stock sank to $86, I recommended it.
And last summer I warned, very specifically, that Apple stock was unlikely to produce the kind of gains over the next five years that it had produced over the previous five. That would take the stock to $1,450 by 2014. I stand by my argument: Anything is possible, but that's quite a bet. And the higher it has risen, the less attractive it becomes as an investment. Sorry folks, but it won't rise forever. The company based at One Infinite Loop does not have One Infinite Stock.
Brett Arends's has recently been published by John Wiley & Co.
"When in doubt, use full throttle. It may not improve your situation, but it will end the suspense."