Replies to post #96 on Apple Inc (AAPL)

[langostino]

growth - then and now

PT, although I agree there's essentially no chance for the sort of p/e expansion in AAPL in the coming 2-3 years that was seen in 1998-2000, I think it unlikely you'll see the sort of expansion of the underlying business either. Back then, the company went from $5.9 Billion in revenues to $8.0. With the revenue line back down in the $6 Billion area, you would need to see some fairly staggering growth in unit sales to create that kind of revenue growth.

Ironically, while average unit cost of PCs generally has been falling steadily (and fairly dramatically) over the past 5 years, Apple has not budged. The good news is, this means Apple probably would "only" have to sell 40%-45% more units to get the revenue line back where it was. On the other hand, if Apple continues to emphasize protecting Gross Margin over unit sales, they'll have less chance of expanding the market -- meaning they'll have to generate that unit sales growth entirely on the back of the pent up demand within the installed base.

Still, riding that cyclical buying wave within the installed base should make AAPL an outperformer relative to the sector during the next 2 years.

Incidentally, although a "sell on the news" is certainly possible, I think there's at least an equal likelihood that AAPL gets an analyst upgrade or two in the wake of the announcements. Keep in mind that "sell on the news" is driven in part by the "news" being less impressive than the pre-news hype. Which has been the case for countless MacWorld announcements leading to this point. But this time, I think the actual announcements are going to exceed the level of expectation. I'm not talking about the reality versus expectation among the tiny fraction of Macheads who live and breathe the rumor and message boards, I'm talking about the AAPL analysts and the sort of people who move institutional money.

Like you, I see only better times ahead in the next 2 years for the underlying business. Like you, I also don't believe the Nasdaq will levitate forever -- in fact, like you, underestimated just how heavy and irresponsible a hand Greenspan would jam on the market this spring.