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Technology Stocks : Apple Inc.

AAPL 269.64

-0.2%

3:59 PM EST

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To: ChrisGillette who wrote (122031)	11/16/2011 9:02:56 AM
From: slacker711	Read Replies (1) of 213172

Tech changes very rapidly, and consumers are not locked-in to Apple. This creates cash flow risk, as Apple's success depends entirely on its ability to crank out must-have products year after year. In contrast, a company like Microsoft provides a great example of lock-in: Apple does have some lock-in on their products. Certainly a Mac owner is very likely to buy Macs again in the future due to both the learning curve and existing software they will have bought. The same is less true for iPad's and iPhone's but both have a certain level of stickiness due to apps and content that can only be played on iOS. However, your broad point is true. The question is how much of that is priced into the market. They will grow earnings in excess of 90% YoY during the December quarter and will be trading at trailing PE of around 9 when you take out the cash. That growth will certainly slow substantially in 2012, but a 30% growth rate is certainly achievable. I think that it is patently obvious that if Apple had higher level of lock-in that they would have a much higher PE than they do now. So the question is, how much more of a discount do you think needs to be applied to Apple? A PE of 7? 6? less? Slacker

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