Wednesday, December 22, 2010

AAPL as Tiffanys

Brett Arends is going to get a lot of hate mail from Apple fanboys for this article giving 10 reasons why he doesn't want an iPad. No matter what you think of his overall point, he's got at least one gem in his 10 reasons.
3. Check out those profit margins!

OK, I admit it: I've been wrong about Apple stock lately. After correctly turning bullish at $85 two years ago, I turned cautious waaay too early. My mistake? This isn't a technology company. It's a luxury brand, like Herm├Ęs or Tiffany. And it's wooed customers so they'll pay almost anything for its products. Last Christmas, Apple's gross margins were 41%. That's incredible. It's good for Apple, good for stockholders—but not so good for shoppers. Me, I don't want to support someone else's 60% markups with my own dollars. Generally speaking, the smarter move is to invest in the Tiffanys of the world—and shop at the Wal-Marts.
Bingo.

4 comments:

Jeff Burton said...

Been ruminating on something related lately. Why is it that oil company profits are considering part of the public fisc, but not Apple's? Why is it so easy to confiscate Exxon's money, but not Steve Jobs'? From the standpoint of pure public utility, energy companies provide the stuff that runs everything, while Apple provides...Angry Birds.

Jeff Burton said...

Sorry, but as the original Apple fan boy* turned spittle flecked heretic, I have to respond twice. In fact, if you ever want to boost your comment count, just keep posting Apple stuff.

This point about Apple being a luxury good is right on. But it's really hard to get people to see that. They think they are buying Honda instead of Chrysler, when they are really getting a fully loaded Mercedes.

* I was programming Mac's in C back in '85.

K T Cat said...

"Why is it that oil company profits are considering part of the public fisc, but not Apple's?"

My reply.

Mostly Nothing said...

Apple is not evil because Jobs is a liberal. Come on people.

You definitely pay way too much for Apple. The OS is so much better than Windows, but at prices more that 2x for hardware is outrageous.

I also don't like the direction the hardware is moving. Non-replaceable batteries etc. If I didn't believe in intelectual property I'd be putting the OS on generic hardware.

The iPad has some nice features, but it's really about $300 over priced.