Horace Dediu (Asymco):
The consensus is that the value of future, unknown products is zero. Not only that but the probability that there will be any products at all is equally zero. Not only that but whatever Apple does to create new products is not perceptibly valuable. The company is simply the sum-of-the-product-parts and nothing more. Cash flows from current products can easily be shown to be more than the current valuation so even these products are deeply discounted. If and when a new product shows up, it will be considered and maybe if it shows promise, the stock will reflect that, briefly.
Dediu hits the nail on the head – as far as Wall Street is concerned, you’re only as good as your latest hit. And this is one of the many reasons why those of us who have watched Apple for a long time go absolutely crazy when we read what passes for Apple analysis from financial experts.
(Hat tip: Fortune Tech)
Wall St may have a point here, after all Apple recently has laid down pretty detailed plans about building a new head office the size of the moon, just so they can fill it with memories.
I wonder how much of Wall’s Street’s lack of faith in Apple’s innovation is related to Steve Jobs. Steve’s health was in question over most of the period that the article talked about, and I wonder if Wall Street thought that the innovation all came from Steve and discounted that innovation since they weren’t confident that it was going to be there long term.
Especially now, I think that Wall Street has a lot of confidence in Apple to execute on its current product pipeline, but is worried that without Steve, the magic touch on future products will not be there.
Wall St. thinks Steve Jobs just sat there crapping out all these products and directed his minions to spit-shine them. In reality, it was the other way around most of the time.
To some degree this is a sensible thing to do: Don’t cut someone a break—or reward them—for something they might do/accomplish.
The problem is that most of Wall Street is doing exactly that for a slew of other companies: Pre-announce something and your stock will rise.
On the other hand they expect the “Second Coming” at each and every one of Apple’s announcements and this is never going to happen—although, the iPad was fairly close.
In the end most investors fail to recognise innovation and potential in many things and see it in things that are and have neither, see the debacle around Color.