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    No, Apple Is Not Becoming Crapple

    Written by

    Adam Clark Estes

    Years from now, you'll tell your kids about today. It was a day just like any other: wake up, shower, get dressed, buy coffee, take subway, do work. And then you heard it. Like a clap of thunder and the long, low rumbling that follows, the sound spilled onto the streets of downtown Manhattan sending waves of panic through the Financial District. It fills up the gutters and rattles the top floor windows. It draws in business and technology bloggers like Sirens singing lost sailors to the Greek shore. It is the sound of Apple slipping, tumbling and falling off its pedestal, no longer the most valuable company in the world but again a sordid second to Exxon. You will remember this day, because today is the day that Apple died.

    Just kidding. Apple did indeed have a bad day on Wall Street, despite just having released a  quarterly earnings report that showed a record $54.5 billion in revenue and a record $13.1 billion in profit. But those record numbers were still lower than predicted by Wall Street. Investors did indeed freak out after letting themselves get caught up in some missed targets and reports of fading demand. In a matter of hours, Apple stock lost 12 percent of its value.

    Twelve percent would be a big deal for any company, but it's a huge deal for the most valuable company on Earth. Huge as in tens of billions of dollars huge. When the share price bottomed out at $441, Apple's market capitalization had been dragged down to $414 billion, just shy of Exxon's $417 billion. 

    As VentureBeat's Josh Koetsier explains, stripping away Apple's uniquely large war chest of cash and assets gives you a different idea about the company's real value:

    Apple now has $137 billion of cash and cash equivalents which, added to its other assets, gives it almost $200 billion in assets. Take that $200 billion off the market capitalization, and you’re left with an Apple stock market value of just $230 billion. That’s for a company that made $41 billion in profit last year, and $13.1 billion in profit just this last quarter. And a company that has not just one but six multi-billion dollar product lines.

    So, according to Koetsier's back-of-the-napkin math, it looks like Apple's no more spectacular than Google or Microsoft. Might as well call it Crapple! Well, no, not really.

     

    When we get caught up in this sort of Wall Street navel-gazing, it's easy to latch onto these kinds of stories and draw conclusions about a company's health. That's clearly what investors did on Thursday and Friday, when they absolutely freaked out about Apple's mediocre earnings report. A small dip in the stock price should've been expected, but 12 percent is extreme. So extreme, that a lot of shrewd analysts have crunched the numbers and figured out that Apple stock is a terrific bargain right now. In fact, Koetsier was arguing that Apple's stock is incredibly cheap, as the company is performing better than any of its competitors.

    Why is it a bargain? Well, there are a lot of quant-friendly calculations that score the stock based on its price-earnings ratio. Lower is better, and Apple's is under ten That's awesome, considering Amazon's is 3,583. But on a more practical level, you have to realize that Apple hasn't actually launched a new product since the iPad. One could even argue that Apple hasn't really unleashed a major innovation onto the world since 2007, when Steve Jobs unveiled the iPhone. (An iPad is just a giant iPhone, after all.)

    There's another shift going on, a cultural one. It certainly doesn't lead to the end of Apple as we know it, but it does highlight the fact that Apple, the company that arguably invented the smartphone, got out in front of a number of new technologies and others are catching up. Android phones passed the iPhone in market share ages ago, and now, some researchers are saying that kids think Samsung products are cooler than Apple products. Samsung also says surpassed Apple in quarterly profits this month, an impressive come-from-behind victory dash.

    When Apple does launch a new product, it will probably do well, and Apple's stock price will start to creep up again. Maybe it's a watch, maybe it's a TV or maybe it's a car. Who the heck knows. It will happen, however, and based on history alone, Apple has a pretty good batting average when it comes to these product launches.

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