VIDEO: Apple and Facebook’s Diverging Fortunes

Last week I sat down with InvestorPlace’s Jeff Reeves to discuss the diverging fortunes of Facebook (FB) and Apple (AAPL).

From The Slant:

When it comes to high-tech investments, few players are more closely watched than the trio of AppleMicrosoft (MSFT) and Facebook.

There’s good reason for all of the attention — these picks all represent different phases in the mobile revolution that is reshaping consumer, business and investor behavior.

Microsoft once was the ultimate technology company with its dominant Windows and Office duo, but the post-PC age is slowly eating it alive. Apple currently is a dominant player in mobile, but many are worried it’s a fading star as devices running Android software from Google (GOOG) continue to gain appeal both at home and abroad. And then you have Facebook, which is growing its mobile audience at a breakneck pace and is one of the few players that seems to have a successful strategy when it comes to the ever-changing smartphone and tablet space.

But when do you stop focusing on the narrative and begin focusing on the numbers? Like with Apple and Microsoft, when do you begin to see the massive cash hoards and operating cash flows as undervalued? And with Facebook, when do you see the optimistic narrative as already baked into shares after a big run?

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  • spakkal

    Charles I think Apple can grow 15% in revenue and EPS easily since margins has troughed. Microsoft P/E was 30 at its high compared to Apple’s P/E was only 15. So I believe AAPL will be $600 by Jan 2014.

    • http://charlessizemore.com/ Charles Lewis Sizemore, CFA

      Spakkal, AAPL will have a hard time maintaining that kind of revenue growth indefinitely, but I don’t consider anything you said to be unreasonable. And I agree fully that AAPL was never grossly overpriced on a price/earnings basis. I would expect AAPL to perform better over the next ten years than Microsoft did in the ten years following 1999 based on starting valuation if nothing else. But, like Microsoft, they also need to reinvent themselves again. Steve Jobs did a fantastic job of that. We’ll see if Tim Cook can pull it off too…or if he turns out to be a plodding Steve Ballmer…. I have my thoughts on that.

  • spakkal

    Charles I agree Apple should reinvent and they are doing. Just imagine looking at the reviews iPhone 5S sells around 125 million, 5C sells around 80 million, old iPhones which they get in by the way of trade-in by Apple and other retailers sell 100 million 4/4S/5 which will take a big marketshare from samsung. I feel AAPL with just iPhone, iPad, Mac and iTunes software & Services can grow 10-15%.

    But if Apple can come with new TV with services, iBank, iPayment, iWallet, iDevices and host of other things which they can develop. But we don’t expect all of things to come to market at the same time. Just mentioned products is enough to have a decent growth rate for the company its size. Most of the companies with their revenue of 170 billion dollars is not growing double digit but has P/E of 20 or more. I believe should at least get a multiple of 15.

    • http://charlessizemore.com/ Charles Lewis Sizemore, CFA

      Agree. Apple should at least trade at the broader market multiple of around 15. Apple is not the growth and innovative engine it was, but it’s still a first-rate company with an ironclad balance sheet.



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