Asymco:
As individuals we think that having lots of cash makes us rich. For companies it’s the opposite. Cash is a liability. If you come across a company that is cash rich and has nothing else, its enterprise value will be zero. Companies are valued on their future cash flows, meaning their ability to generate cash, not how much they managed to keep. In other words, cash is a measure of past success and investors are interested only in future value.
This is an excellent FAQ on Apple and the Everest-sized mountain of cash they are sitting on.
Dediu has always explained financial stats well. A remarkably clear presenter of many other issues, too.
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The “Apple phenomenon” is unique in recorded history—because of the myriad combined factors which have lead to its current “outrageous fotune”(to borrow a phrase from Shakespeare’s “Hamlet”), as well as the various commercial, societal, financial, political, geo-political, and environmental developments. As for me, I look forward to seeing what will happen, more short-term, as a result of Apple’s $350 B investment in America, and, long-term, what will the world’s most valuable company do with its evolving capabilities as a global corporation?
I guess that’s why Tesla nearly outperformed Apple in share gains over the past 52-week period. Tesla is constantly burning through cash and the big investors seem to really like that strategy. That kind of thinking is just too risky for me because I need to have a cash cushion in order to feel comfortable and safe. In Tesla’s case, I don’t see how that company can have that much future value because I don’t see at what point they can stop that constant cash burn. Obviously, greedy big investors can see the turning point.
With Apple having all that cash on hand, I think they have the ability to do anything they want to increase the value of the company. Sure, they’ll have to spend some of that cash but it seems a lot better than having none to spend. I suppose future greed always wins out over being conservative, but I still don’t feel comfortable with that type of reasoning. Maybe that’s why I’ll never be rich. I would rather be a CEO running Apple than a CEO running Tesla and not knowing where the next cash infusion will be coming from. I suppose it’s just a matter of faith and luck. It appears as though big investors have more faith in Tesla than they do in Apple.
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You seem to have a misconception of exactly what money is and what it’s for. Aside from all the significance of all the financial buzzwords, stock performance, etc., it’s simply “an idea backed by confidence.” That’s it. It’s that simple.
Tesla and Apple are more alike than they are different.
As far as Tesla goes, it has great products that people all over the world are loving and snapping up. Over half a million reservations for Model 3 BEFORE it was even revealed?!!! Now if that isn’t confidence, I don’t know what is. THAT’S what makes plunking down $1,000 for each reservation no-brainers for those customers. And before that, the people who paid the big bucks for the first roadster also had confidence enough to so plunk. Model S and X have also been big successes at their respective high-end prices.
“Burning through cash” you say, but on what, you didn’t ask or say. Well, they’re predicting the future and preparing for it by investing profits from current sales into INFRASTUCTURE which will be so needed in the near future once all those Model 3s are in customers’ hands and on the road, along with ever more and more Ss, Xs, Ys, and pickups, to say nothine of Semis and their charging needs. These are all prudent and necessary capital investments that Tesla happily CAN now make in order to “keep the ball rolling” and to be able to stay ahead of the competiion.
If I can see this, there have to be legions who also recognize the appartent wisdom of Tesla’s strategies. So, there’s the CONFIDENCE I’ve been talking about, hence, there’s the MONEY—both from its customers and its own proactive investments.
As for Apple, their money is also the result of its customers’ CONFIDENCE in so many ways for over three decades, now. The fact that is wealth and reach are also global speaks well of the universal appeal of its products. That’s real and palpable CONFIDENCE—hence MONEY!