Apple has reached orbit

Apple as corporation has liftoff and now is entering an orbiting phase of its life cycle which will eventually lead to a decaying Orbit. 

The belief that Apple’s stock is undervalue due to future earnings potential  in foreign lands is a deception which will soon be revealed due to market saturation and competing products with similar functionality that are available at a lower price point.  The principles of supply and demand, along with substitution are in play.  The principles of substitution states when a several similar or commensurate commodities, good or services are available, the one with the lowest price will attract the greatest demand and wide distribution which is why many US companies move their manufacturing overseas, lower labor cost.  Apple‘s products are not immune to these principles.  

Apple has sold approximately 210 million iphones since its inception four years ago.  The growth rate of Apple’s iphone is astonishing with 270,000 iphone sold in the first year and five years later, if reported sales data is accurate is approaching 100 million units for 2012.  Iphone sale will slow next quarter and there after maintain a steady sale rate very much like a rocket which has reach an orbit until other forces slows it momentum and its orbit begins to decay.

The Analysts belief that Apple is going to expand it sales by 20% a year for the next 5 years at current pricing is a deception.  To accomplish this, Apple sales will have to increase to 153 billion in 2012 and by 2016 have annual sales of 318 billion.  This equates to approximately 250 million iphone sold or 685000 iphone sold daily in 2017.   Iphone sales are the anchor of Apples earnings.   What if the iphone isn’t the flavor of the day in 5 years?   Could this possibly happen?   It has already begun in the United States as   Apple will not retain all of its former users as the Iphone and Ipad interface with peripheral devices is lacking.

The fact is Apple is manufacturing at least 340,000 iphone and 125,000 Ipad each day. That is if their last quarterly report is accurate.  That means the world in one year will have an additional 124 million Iphones and a poultry 45 million Ipad which will have to be purchased.  In five year if projected growth rate of 20% annually are accurate there will be nearly 1 billion Iphones and 450 million Ipads sold.   Apple product will be commonplace and just other commodity with significantly lower pricing which will dramatically affect apples profitability.

The majority of Apples sales will not come from the United States as its market has already been saturated and now the Apple fade being diminishing.   You can see evident of this in its declining stock price.

The belief that foreign markets has the ability to absorb the millions of iphones, Ipads and other products being manufactured  is not accurate at least at current pricing which is unaffordable to the masses. 

 I know a lot of you Apple lovers have a belief that the first item purchased by Chinese or Indians when money earn is a phone.   This is preposterous I would think it would be food and clothing. But hey I but I can imagine all the naked malnutrition Chinese walking around texting and talking on their new iphones and Ipads.  I am now having a mental picture of Indians wearing nothing more than their Head Wraps.

Just as any life cycle there is a beginning a growth an prime and a decline.  Considering the competing products and other factors Apple is likely reaching a plateau considering its staggering amount of income it is currently earning.  

I want to reiterate Apple profitability is beginning to stagnate due to the principles of substitution and supply and demand.  It’s definitely not Rocket Science to understand these principles.  So if you have capital invested in Apple I would advise seeking alternative investments as Apple stock price is defiantly overvalued at current pricing.

I AM NOT APPLE HATER

People have been accusing me of being an Apple Hater. My commentary has nothing to do with Apple products.  I have iphones, Ipad and ipods the products are fine.  But to say Apple products are significantly superior to other electronic devices would be a lie.  I have been providing my comments so people will think before making a stock purchase they may regret.  I believe I am reasonably intelligent.  So should I  just believe all the analysts forecast about Apple stock  are would a prudent person investigate before purchasing an asset to insure it is properly valued.  I realize my insignificance in this world and know it is short-lived.   However, I do believe in integrity and I do not see much of it on display on Wall Street.  Considering the majority of Apple’s Stock is owned by institutional investors, I believe it has been manipulated based on future earnings growth which is overly optimistic.

Apple’s last quarter net Profit of 11.62 billion and increases of 11% to 31% on earning is very suspect, considering the fact Apple’s 2007 net income was 3.5 billion.  So if the recent reported earnings are accurate, which I doubt that will mean Apple's net income for 2012 will be approaching 40 Billion which will be about 1150% from 5 years ago.   I don’t know of any company in the history of the world that has had that type of growth, it’s unbelievable.
Apple cannot continue to grow its sales and earnings at over 200% a year and is likely hitting the top of the bell curve?    If the sales numbers are accurate then apple is manufacturing at least 340,000 Iphones a day.  Their product will become commonplace, they are definitely overpriced with that kind of production rate and will lead to a price cut as currently Apple products are unaffordable to the world mass population.

Time will tell who is right, if the analysts or me.

I have reviewed the numbers and can see the waning appeal of apple in the United States which will likely spread to the rest of the world.   Apple net profit will stagnate at 40 billion, maybe 50 billion.  For God Sake they are just smart phones, and the Ipad is nothing more than an enlarged iphone.
If I am wrong I will acknowledge my error, will the analysts.  I doubt it.

Is Apple’s fashion trend nearing the end?

The reported earnings claimed by Apple are frankly unbelievable.   Apple reported 35.1 million Iphones were sold in the last Quarter with the majority of the iphones not sold in the United States but overseas.   Is it possible Iphone sales are declining in the United States?  Its apparently appears to be if 64% of Apple’s sales occurred overseas.  Its common knowledge American set many fashion trends which are emulated throughout the rest of the World.   Think of the many fashion trends which are here today and gone tomorrow.

 Could it be that Apple’s tremendous production rates are causing their products to become commonplace and less trendy?  What will happen in though foreign lands when they find out their not as chic owning an Apple iphone or Ipad, could that possibility affect sales?   Or heaven forbid a competitor develops the latest greatest thing and the herd must have one.   Honestly, who can actually use all the functionality built-in to the current smart phones, for that matter needs all the apps.   How much better is the Iphone 5 going to be, is everyone going to rush out and buy one?  

Its apparent Apple products are becoming less fashionable at least in America are more sales would have occurred in the  United States.  I don’t want to offend other countries, but America is definitely the best at marketing and other countries typically follow.  Look how Apple convinced the herd they absolutely needed to buy an iphone and started a stampede, with hundred standing in line just to buy the latest gadget.   Unfortunately, like most love affairs they end and I believe end of the herd love affair with Apple is just around the corner.  So before you listen to though deceptive analysts telling you Apple's share price is going to 1000 per share consider my comments as its current sales and growth rate are not sustainable and likely will start declining as the herd is an adulterous animal.

Apple” s Earnings appear to be Fraudulent.

The reported earnings claimed by Apple are frankly unbelievable.    They want the investors to believe that 35.1 million Iphones were sold in the last Quarter and of course the majority of the iphones were not sold in the United States but overseas.    I wonder who is verifying all the millions of Iphone sales that Apple’s is alleging occurred during the last quarter.  Definitely not The Security Exchange Commission.  It amazes me the short term memory of the public.   Less than 4 years ago Wall Street was tanking due to mass corruption.  Its apparent nothing has changed.   Fortunately, the Government intervened along with the Fed Reserve and bailout though WHITE COLLAR THEIEFS.

To give you an idea, why I think the reported earnings are fraudulent it would required that four Iphones were sold every second in every day or approximately 358,163 each day of the quarter which is 98 days.   The last available information on iphone production was in September of 2010 when Apple was producing a 137,000 iphone per day.  Not only does Apples Sales jump by 88% a year it can miraculously increase its production by 210% in a year and half and have not any cost associated with the new production as its net earnings increased by 11% to 31% in its last astonishing Quarterly report.   That is interesting as 2011 net income was 20%, I guest Apple has already paid for all recently built factories in China.   It is unbelievable you could said it’s a miracle are possible even lies.

Apple’s alleged Iphone sales are almost greater than the population of California.  I am sure Apples next Quarter sales will be greater than the population of California and possible the United States which has a population of 311,591,917, considering its past phenomenal growth rate.

 Who knows in ten years every single person in the whole wide world will have a Iphone, and guess what the price will never be lowered as the demand will never cease, especially when all  though extraterrestrial  aliens start purchasing though high tech iphones.  The Universe is a Big place Brother, Apple will be able to sell Iphones forever.    Hey, I just realized the Apple corporation maybe God, it certainly has had many miracles in the last couple years. 

 You just have to believe.  Keep the faith brethren,   Apple stock is going to $1000 per share for sure, maybe by next month.   What does Cramer say:  Buy-Buy-Buy Buy-Buy-Buy!!!!   I know his name is Jim but I think he should change it to Richard so I could call him by the nick name which better describes him which would be Dick.

I am back; I think that’s what ET said.  Sorry, but I haven’t finish my comments,  that is if you are still with me and not getting mad, I recently received malicious remarks regarding my other commentary on  Apple Capitalization and Stock Price.    It kind of makes me feel unappreciated.

So let’s now investigate where the majority of the Iphones were sold in the last Quarter and why Apple’s Next Quarter guidance is ultra-conservative.   The second part of the investigation can be easily discovered as Apple’s recent earnings and profit are definitely fabrications.  Its likely Apple’s prior earnings reports are also inaccurate due to the astonishing growth rate.   I don’t want to offend anybody and call them lies but when it looks like a Duck and quacks like a duck it’s a Duck, my Friends.

I did a little research since the analysts say the majority Apple’s expanding earnings will be achieved in third world countries that are economically rising with the help of Wall Street and the Apple Corporation of course.   As I recall Apple does not manufacture any devices in the United States anymore.   Ultimately, who has control of the tremendous factories which were built by American corporations in China which is a Communist Nation?   Do you actually think apple has full control of its factories in China?  I think Apple's Manufacture is called Falcon.  That Discussion is for another day.

The manufacturing  capabilities of the United States has been diminishing for the last 30 years and we are left with an economy which produces  bubble after bubble to provide an illusion of prosperity to all the masses or may just a few, if you are in the right circles that is.  However, I think the geniuses on Wall Street say we think they work.  We will see how that turns out in coming years.

Back to the third world and the per captia income which is published by Wikipedia. You can check to make sure I did not misrepresent or make any errors.

Country	POPULATION	World	Per captia income US Currency
China	1,347,350,000	19.22%	5,414
India	1,210,193,422	17.27%	1,389
Indonesia	237,641,326	3.39%	3,509
Brazil	192,376,496	2.74%	12,789
Pakistan	179,381,000	2.56%	1,201
Nigeria	162,471,000	2.32%	1,490
Bangladesh	142,319,000	2.03%	678
Mexico	112,336,538	1.60%	10,153
Philippines	92,337,852	1.32%	2,223
	3,676,406,634	52.45%	4,316 Average

According to the various internet sites the iphone 4 is more expensive in these third world countries than in the United States.  These countries  general population do not have the income to buy a 8G Iphone selling for $788.00 which would take the typical person in China almost two months of income to buy.   I don’t think the typical person in China is going to buy the Iphone, especially when there are cheaper alternative smart phones with similar capabilities.  Forget about India’s general population buying an Iphone.  Possibly, Brazil and Mexico, but in the millions, I don’t think so unless the Iphone price is significantly lowered.    The other nation are a no sell, the population cannot afford the cost of the overprice iphone, which it has to be if Apple is producing 350,000 or more units daily.  According to Apple‘s recent financial statement, this amount of Iphone is being manufactured.   

This leaves the more affluent people of these nations to buy all the millions of iphones which Apple is manufacturing every quarter.   Just as the wealth in the United States has been polarized so has the World's wealth with 2% of the World population owning more than half of global household wealth.

Considering 64% of Apple’s earnings came from international sales or about 24.5 million iphones, How many people are left in these  third world countries that can afford to buy an Iphone?  Just look at the annual per capita income of these countries.  Hopefully, you will get the picture that Apple has to lower the cost of its product to significantly capture   more market share and grow its sales.    The market base has to be shrinking considering the unbelievable quantity of iphone sold this last quarter. Who is going to buy the millions of iphone coming into the market without a price cut?  Maybe you can tell me.

Which brings be to my last thought, which I am sure you are glad.  When is an audit going to be conducted on Apple to verify their Quarterly reports are not just smoke and mirrors?   Don’t be surprised if Apple earnings for this quarter get revised downward.  I wouldn’t be.

Before you make any ignorant comments I do not have any Apples shares.

APPLE STOCK PRICE AND MARKET CAPITALIZATION BUILT ON DECEPTION

If Apple’s  Stock Price and Market Capitalization was legitimate and based on fact instead of speculation its stock price would not  wildly fluctuate on a daily bases.  Establishing Apple’s market capitalization on its historical sales growth which is clearly unsustainable is a deceptive method which many analysts have utilized to promote apple stock as being greatly undervalued though it has increase by more than 250% in the last 2 years.

These are the facts:

Apples 2011 net income is reported to be 26 billion on revenues of 128 billion.  This is a 185% increase from Apple’s 2010 net income which was 14 billion.  This growth rate will never occur again due to the considerable income apple has achieved.

Many analysts believe Apple will expand it sales by 20% for the next 5 years due to its smaller market share of a sales compare to its competitors.  This is a great deception.  To accomplish this apple sales will have to increase to 153 billion in 2012 and by 2016 and have annual sales of 318 billion.   This will never happen due to the enormous scale of 318 billion.

By comparison NASA Space Shuttle operating budget in it last year was 3 billion.   I provide this as an illustration, to give the cheerleaders a clued about the staggering amount of income Apple currently produces.

Apple's average net income over the last 5 years is

11.3 billion.  This income average would typically be utilized to estimate a value for and asset or company.  How is it possible for a company with an average net income of 11.3 billion to achieve a market capitalization of 590 billion without some form of manipulation by the institutional investors?

 I realize there is a difference between market capitalization and the use of a capitalization rate to determine value.   However, market capitalization is a qualitative value not easily determine as it represents the public consensus on the value of a company's equity and in Apple’s case it has been inflated.

The use of a capitalization is a quantitative method to determine value from quantifiable data such as income and expenses.                                                       

Let’s assume an unlikely scenario that Apple's  net income is 40 billion in 2012.  To achieve this Apple will have to increase its sales by 157% or by 69 billion, this will never happen.   But for this analysis I will utilize a net income  40 billion to determine a value for Apple as a company.

If a typical capitalization rate of 10% is applied to this net income, a value for the company can be estimated:

                                                           40 billion / 10% = 400 billion.

I acknowledge the capitalization rates are assumption, but historically a 10% rate is typically used by investors.   By this analysis Apple’s market capitalization appears to be in excess by at least 265 billion.

Now let get to the 1000 dollarbut now has been revised down to 750   share price by these expletive saying  Apple's  stock will achieve in a relatively short time.   

I would have like to use the actual word which best describes these analysts, but I probably would be censored. 

The analysts are the likely the same expletive , which made though wonderful forecasts about similar bubble stocks during dot com bust. 

This will mean that Apple as a company is approaching a Trillion dollars in value with a the capital recovery of more than 25 years on the money invested  as Apple’s net income will stagnate at 40 billion, due to the enormity of that sum.

Every additional billion of net income will be more difficult to earn, due to its enormous size which is 1000 million.  This amount of money buys quite a few Ipads, downloads and other apple products.  How many more apple products can the market absorb?    

If Apple wishes to capture more market share of sales it will require developing additional products with lower  prices as the more affluent markets have been saturated, leaving the less capable markets the task of buying all though millions products which are forecasted  to be manufactured and sold by apple in the coming years.   Eventually their products will become common place and less desirable.  You won’t be that stylist with your new iphone or ipad, you will be just another part of the herd.  

 Just as computers, big screen TVs and many other electronic devices have been commoditized, so will apple products if they wish to generate more sales.  This directly relates to Apple’s value as a company and its allege income growth potential.   Lower sale prices for Apple’s products will directly impact its net income and value as a company.  

If apple stock price continues to soar to new heights, do not jump for joy as it has nothing do with its intrinsic value as a company but is just another example of Wall Street manipulation by a handful of Hedge Fund Managers which allows them to collect their billions for managing the working class retirement funds.   Seventy percent of Apple’s stock is owned by institutional investors which have colluded to inflate apple stock price, due to its incredible growth rate over the last 5 years and the difficulty in evaluating its most important characteristic which is the marketing of its products.

 Eventually, one of the big investors is going to folded there hand and Apple stock will drop like a stone.    Remember this comment because a decline in Apple Stock is in the near future.

Apple Stock Price The Great Deception

Apple stock price is worth every penny, that’s if you are smoking the right stuff.

The insanity of the speculative markets continue to be cheered by deceptive advocates who have made fortune but don’t acknowledge the actually cost to the United States future which is likely to see a declining standards of living in the year ahead . This is all done for a cause, so that a handful of people can make their billions by manipulating the stock market to show an illusion of prosperity returning to the economy. 

The analysts who are projecting Apple stock to reach $1000 a share are the likely the same expletive, which made though wonderful forecasts about similar bubble stocks during dot com bust. 

I would have like to use the actual word which best describe these analysts, but I probably would be censored. 

The rapid rise in apple stock price has nothing to do with current earnings but is based solely on speculative growth with GREAT EXPECTATIONS that sales growth will increase by 20% annually or more for the next five years.  This is why the cheerleader believes apples stock is significantly undervalued even though it has increased by over 250% in the less than 2 years. 

If apple stock price continues to increase, don’t jump for joy.   The continually increase is nothing but  herd investing which has caused apple’s stock to increase by 56 % since the beginning of the year.  

 It was not long ago the herd believed that house prices could never go down but would continue to increase rapidly year over year.  Just as the apple cheerleaders believe its stock price cannot decline, but will continue to increase.  As long as the herd believes the fairytales being promoted in regards to Apple’s sales growth its stock price will increase.   As soon is its earnings and net income do not meet the ridiculous expectations it will drop.  

FACT:

 Apples 2011 net income is reported to be 26 billion on revenues of 128 billion.  This is a 185% increase from Apple’s 2010 net income which was 14 billion.   A good majority of Apple earnings came in the 4^th quarter, I.E holiday season when it s gross earnings increased by about 18 billion from the previous quarters to over 46 billion.  Unbelievable wouldn’t agree?

 The herd believes that Apple can expand it sales by 20% a year for the next 5 years is a deception.  To accomplish this apple sales will have to increase to 153 billion in 2012 and by 2016 and have annual sales of 318 billion.  

I don’t know how the herd can believe this fabrication.  I guess they are smoking some good dope. 

Based on last year revenue and the prediction that sale will increase by of 20%, Apple’s net income will not exceed 40 billion in 2012.    Apple’s net profit is approximately 20% based on 2011 earnings and net income. 

                                           Sales – cost of goods sold / sales = net profit

                                               128 billion – 102 billion / 128 billion ≈ 20 %

2012 revenue if sales increases by a 20%.

                                                   128 billion X 1.20% ≈ 153 billion

2012 estimated Net Income from gross sales.

                                                  153 X 20% ≈ 31 billion

Every additional billion of net income will be more difficult to earn, due to its enormous size which is 1000 million.   If the analyst’s 2012 forecast are correct Apple’s revenue will increase by 25 billion or 25000 million dollars.  This amount of money buys quite a few Ipads, downloads and other apple products.  How many more apple product can the market absorb?     

By comparison NASA Space Shuttle operating budget in it last year was 3 billion.   I provide this as an illustration, to give the cheerleaders a clued about the staggering amount of income apple currently has.

Apples net income from the past five years, from 2007 to 2011 is approximately 56.5 billion.  A major jump in sale and income came in 2010 to 2011 when its net income increased by 11.91 billion.

What is never asked is how a company with a net income of 26 billion in 2011 can have achieved a market capitalization of 590 billion.   I realize there is a difference between market capitalization and the use of a capitalization rate to determine value.   However, market capitalization is a qualitative value not easily determine as it represents the public consensus on the value of a company's equity and in Apple’s case it had been inflated.

The use of a capitalization is a quantitative method to determine value from quantifiable data such as income and expenses.                                                        

It is relatively easy to determine Apple value utilizing its net income and a capitalization rate.  Apple average net income over the last 5 years is 11.3 billion.   This income average would typically be utilized to estimate a value. 

But let’s assume an unlikely scenario that Apple net income is 40 billion in 2012. 

If a typical capitalization of 10% is applied to this net income, a value for the company can be estimated:

                                                           40 billion / 10% = 400 billion.

But to entertain all the promoter of apple stock let utilize a capitalization rate of 6%.  The lower the capitalization rate the less risk involved with the investment, consequently a higher value.

                                                        40 billion / 6% = 666 billion.

I did not calculate that number on purpose.  However it is interest.  Maybe, apple stock price is associated with one of the deadly sins – GREED.   It certainly appears to be.

I acknowledge the capitalization rates are assumption, but historically a 10% rate is typically used by investors.   By this analysis Apple’s market capitalization appear to be in excess by at least 265 billion.

Now let get to the 1000 dollar a share price which every analysts and his brother are saying  Apple stock will achieve in a relatively short time.    This will mean that Apple as a company is worth a Trillion dollars with a the capital recovery of more than 25 years on the money invested  as Apple’s net income will likely stagnate at 40 billion, due to the enormity of that sum.

Apple’s income growth is beginning to slow, but this does not stop the analysts from developing deceptive forecast about Apples future growth citing its relatively low market share of worldwide computer, Smartphone and Tablet sales.

One must ask who is paying these analysts for these deceptive forecasts.  Could it be the herd on Wall Street which severely damaged the US Economy by all the financial instruments which were developed, supposably to limit risk, but were merely another device which allows them to hedge their bets?   .   

It’s not surprising that the 70% of Apple’s stock is owned by institutional investors.  Apple as company is a great candidate to collude on, due to its incredible growth rate over the last 5 years and the difficulty in evaluating its most important characteristic which is the marketing of its products.

Marketing  is an intangible asset, akin to Goodwill which is very difficult to evaluate    There is a reason,  Apple’s sales  are less than its competitor  which is due to their considerably higher cost, which in many cases are functionality no better than their competitors.    But if you listen to the experts, it’s like Apple has no competitors or competing products which the consumer can choose, but can only buy Apple products.        

I have several apple products, including an ipad which is nothing more than an oversize iphone.  The Ipad functionality and interface are significantly inferior to a lap top.  The appeal must be to the herd, which is high on something and give them a convenient place to watch video as its utility is more like a toy than a useful device.

If Apple wishes to capture more market share of sales it will require developing additional products with lower  prices as the more affluent market have been saturated, leaving the less capable market the task of buying all though millions products which are forecast to be manufactured and sold by apple in the coming years.  

Just as computers, big screen TVs and many other electronic devices have been commoditized, so will apple products if they wish to generated more sales.  This directly related to Apple’s value and alleged income growth potential.   Guess what else is affected by a lower sale price?  That right earning and net income will be lower, which is another reason Apple income will stagnate.

 I could go on about why apple stock is a bubble, but it would be in vain as the herd does not wish to sober up as the dope Wall Street is selling is that good.  Maybe I need a toke.