I’d also consider that there may be a bubble going on when it comes to Apple’s stock price. A few interesting facts:
Apple’s book value is about on par with Microsoft, when:
- Microsoft has 50% more revenue
- Microsoft has 60% more net profit
- Microsoft has a higher profit margin
- Microsoft has a dividend payout
- Microsoft has more cash and liquid assets on hand
- Microsoft has zero debt
- Microsoft owns its markets (like 85%+ dominance)
- Microsoft’s latest core product is exploding in adoption and sales
From a technical standpoint, there’s no way Apple should be valued equally - let alone above - Microsoft.
Apple’s running on a lot of these “forward looking projections” and assumptions that it’s great run of the last few years will continue ad infinitum. We’re already seeing Apple start to lose market share, and - like you caution - when those really cheap Android smartphones start to ship it will lose even more marketshare.
This analysis by the Motley Fool assumes a completely static picture of products and marketshare over the next 3 years, and assumes that the market worldwide will continue to grow as it has over the last year. I don’t think any of those assumptions are valid, and thus the conclusions should be taken with a huge grain of salt.
When the stock starts to dip, dump it. That’s true of any stock. Don’t ride the bubble back down - definitely NOT a good thing!
Microsoft does have debt.
I know. I own a nice chunk of their 4.2% 2019 bond, which has a gain for me of about 9% on top of the coupon. Not too shabby, IMO.
MSFT is also considering issuing debt to pay dividends in the US. The story is from Bloomberg, and I know there’s an issue with posting stories from Bloomie, so I won’t.
There's your problem right there. Where's the growth? Microsoft is not likely to increase its share or profit in those markets. Desktop Windows and Office are static, new purchases mostly replacing old ones. The Kin was a miserable failure in the mobile arena. Nobody but the fanbois are excited over Win7 Phone with the raving success of Android and iOS. It's an also-ran unless it can be vastly better than the competition (yeah, right), and Microsoft has no monopoly power to leverage an inferior product there, and can't even leverage corporate dominance since RIM owns that. The XBox recently turned profitable after billions in loss leaders, but already lost the #1 console spot with the PS3 just about caught up already.
We've seen massive, sustained Apple growth with constant successful branching out into new markets over the last several years. Seven years from nothing to the #1 music retailer in the US for the iTunes store. From nothing to almost half the worldwide cell phone profit for the iPhone in three years. From nothing in a market at all to millions of high-margin iPads sold. The high-margin computer division is growing faster than the other OEMs (which are mostly low-margin), securing 91% of the highly profitable premium computer market in the US. That's a reason to expect future growth and highly value a stock.
What about Microsoft? Being relegated to bit player status in the mobile market, where do you see Microsoft growing in order to justify the stock price? Do you think Microsoft can pressure HTC to drop Android in order to get back into the market?
Your degree in Finance is from WHAT college? You claim to be an engineer... not a Financial analyst... but here you are making stock advice. By the way, Microsoft and Apple both have no debt... tossing that in as though Apple DOES have debt is disingenuous. Nor can you make the claim that Apple's "book value" is about on a par with Microsoft based on that list. That is not the way book value is calculated.
Incidentally, Microsoft has only $36.8 Billion in cash and liquid assets on hand, according to Bloomberg as of yesterday. Apple has around $45 billion, according to their last quarterly report. So that little "factoid" of yours is not true.
As to the ZERO DEBT? Microsoft's BoD has just authorized $6 billion (as of September 13, 2010) in debenture sales to pay their current year dividend and for stock buy backs... hmmmmm. According to reports from insiders, also according to Bloomberg, it is because their cash and short term assets are held OVERSEAS... that's a lot of confidence in the US economy (NOT!) from Microsoft... and they would prefer to borrow than draw down assets??? So that will no longer be true as of this month or next.