Apple Is Worth More than Steve Jobs

by: Stephen Coleman posted on: July 22, 2008 | about stocks: AAPL    

I wish Steve Jobs a long and happy life. I thank him for all of the good that he has done. Sadly, others do not seem to feel this way. The New York Post yesterday joined the chorus of negative voices speculating that Steve Jobs is in ill health. This is pure speculation. But, the implication is that Mr. Jobs's demise would tank Apple's (AAPL) stock price.

I have lived through this before. I owned Apple in early August of 2004 when the company announced that Steve Jobs was taking a leave of absence. I still own it today. On July 31, 2004, Apple's stock price closed at a split-adjusted price of $16.17. When Apple announced that Steve Jobs was well in January of 2005, Apple's stock price finished the month at a split adjusted price of $38.45. During the six month "cancer scare," Apple's stock price rose 137.79%.

This is the monthly ownership experience of this Apple shareholder for the six "cancer-scare" months ending: August of 2004 +6.68%; September of 2004 +12.35%; October of 2004 +35.19%; November of 2004 +27.98%; December of 2004 -3.97%; January of 2005 +19.41%. This is good. This says to the world that there is a bigger issue than Steve Jobs's health that we need to focus on, if we truly want to understand the behavior of Apple's stock price.

Apple Inc.'s stock price is driven by its earnings growth and public expectations. There were three relevant earnings announcements during the Jobs "cancer scare": 7/14/04; 10/13/04; and 1/12/05. On July 14, 2004, Apple announced year-over-year earnings growth of 220%. On October 13, 2004, Apple announced year-over-year earnings growth of 117%. On January 12, 2005, Apple announced year-over-year earnings growth of 312%. With earnings results this outstanding, investors bought the stock for the right reason: the iPod had rejuvenated the company. And, the investors expected the iPod to keep on delivering. They were right. iPod continued to be the growth drive for all of the years 2005 and 2006.

Yesterday, on July 21, 2008, the iPhone and the MacTel computers are the earnings drivers. The iPod is relevant today because the earnings from the iPod product alone are sufficient to cover the overhead cost of the Apple retail stores. This fact makes any additional contribution to retail sales from the iPhone or the MacTel computers pure gravy. I am talking about a lot of gravy!

Going forward, the earnings picture at Apple for the next three years is rock solid as the iPhone seeks to achieve global market share of 10% and the MacTel computers seek to achieve the same. These products are in the pipeline right now. The iPhone currently has global market share of less than 1%. The MacTel computers have global market share of 3%. Both products are selling like hotcakes. Whether Steve Jobs is with Apple or not, there is simply nothing to worry about for at least three years. I expect the earnings growth to be too robust to resist. I expect the world to keep buying AAPL.

This article has 17 comments! Add yours below...
Stephen Coleman

Stephen Coleman

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This article has 17 comments:

  •  
    digivision
    Jul 22 09:38 AM
    My Website
    very excellent point. thanks for reminding me , I also own Apple for that long, actually longer but I totally forgot about the leave of absence he took in 04
  •  
    JB Money
    Jul 22 09:41 AM
    My Website
    Nice perspective. To ever say a company the size Apple is the results of one man is very naive. I understand his importance in getting Apple then to Apple now, but I do not for one second feel all his work falls apart when one day he hangs up his black mock turtleneck.
  •  
    peter02l
    Jul 22 09:57 AM
    Not to mention the hints of new products during the conference call, that are going to be introduced in the coming months. This company is like a monster that not only is getting bigger, but is growing more tentacles.
  •  
    boxerconan
    Jul 22 10:17 AM
    Thanks. I agree with your article. I love AAPL's products and fundamentals, but I do not appreciate the management's disrespectful attitude towards investors as seen yesterday's CC. I consider it is an added risk factor. I will keep my current position but I am not adding on this dip.
  •  
    User 230492
    Jul 22 10:18 AM
    Monster?
  •  
    mtkoren
    Jul 22 10:23 AM
    Monster?
  •  
    was_fred
    Jul 22 10:48 AM
    Mr. Coleman, I applaud you! Well done!.
    Steve’s health notwithstanding, Apple’s performance speaks for itself. With or without Steve, Apple is full of creative people who come up with spectacular products. Yes, Steve has health issues. Did anyone not listen to the conference call? Oppenheimer came right out and said that Jobs had no intention to leave Apple any time soon. Also, even if he did, doesn’t anyone think that he would make damn sure that there is a proper succession plan (not like when he was ousted by Sculley). Short sighted day traders that don’t see the whole picture can go ahead and take their losses by jumping out and driving the stock down. Me, I’ve been long on Apple for 12 years now. While I’ve had the blues a couple times, my long-term investment has paid off quite handsomely. Regardless of the nay-sayers rants, Apple continues to be a viable company which deserves a PE > 40. I’m LONG!
  •  
    michiganjake
    Jul 22 11:04 AM
    Nice job Steve. You are on the money with your comments. The game is the same. Blow away the Street, underestimate the next quarter, and watch the stock drop. Wait for positive analyst comments, mind blowing worldwide distribution announcements, new product releases, etc., and watch the stock climb to a new high. Meanwhile the hedge fund and mutual fund boys and girls make their money on the short and long sides while too many small investors jump out fearing the sky is falling! Hang in there. Never sell into a panic. Have patience and be rewarded long term.
  •  
    mrtaxx
    Jul 22 11:07 AM
    My Website
    $600 Apple price target by this writer

    www.bloomberg.com/apps...

    www.bloomberg.com/apps...

    gigaom.com/2007/12/27/.../
  •  
    F. J. Taylor
    Jul 22 11:20 AM
    May Mr. Jobs "live long and prosper" - but I am staying with Mac! If the idiots and big money manipulators bail, and the price goes way down - watch me pick up some more!
  •  
    F. J. Taylor
    Jul 22 11:20 AM
    May Mr. Jobs "live long and prosper" - but I am staying with Mac! If the idiots and big money manipulators bail, and the price goes way down - watch me pick up some more!
  •  
    Muddling
    Investor
    Jul 22 11:24 AM
    My Website
    Jobs is Apple. Make no mistake about it. He is irreplaceable genius. Stock might hold OK for a while if/when Jobs is gone, but long term, Apple without him is dead. Was dead once already.

    Disclaimer: Long Apple, still my biggest position.
  •  
    George
    Laidlaw
    Jul 22 11:37 AM
    My Website
    There is something wrong in the US with the result of subprime mortages and the greed of banks etc it has resulted in an example where Greed has taken over from any degree of honesty. For Apple which consistently even in the world of recession /depression is beating out other computer companies, makes remarkable devices and is continually taking more market share yet the market gurus and companies or investment firms holding large block manipulate the market so the price drops when the shares should be climbing. Why do companies with poor performance go up when Apple goes down? Why do people who know nothing about computers or quality devices hate Apple?
    If this is how the US economy works then no wonder its in the bottom with bottom feeders.
    Why not give recognition where it is due. Apple is one of the best companies in the communication field.
    With growing sales, iphone and the growing demand for Mac computers why do the shares fall when Apple says it will earn a little less in the next quarter (even though it always out preforms any of their conservative estimates). Do our economic gurus always look to find a flaw when they should say WOW even in a recession time Apple is still outperforming and is a reliable company that will continue to grow at a faster rate than other companies.
    Lets find a reason for looking at reality and not at the negative hate filled coverage of those who are supposed to be giving non biased economy advice.
  •  
    Constable
    Odo
    Jul 22 12:40 PM
    Wake up people! Apple is only worth as much as WS or investors says it is. Fundamentals mean nothing. Investors say they want a succession plan revealed to them. B.S. Unless it's a clone of Steve Jobs, what's the point. Even if a succession plan is revealed, then it will be assumed that Steve Jobs is ready to retire/die. If WS has already decided that Steve Jobs is Apple, then basically that's the end of Apple if Steve Jobs leaves. None of it makes sense to me. It already seems like a no-win situation. It makes no sense to clobber a company over rampant speculation.

    I'm long on Apple, but mighty nervous on how this company's value is being determined.
  •  
    Partners in
    Grime
    Jul 22 09:52 PM
    My Website
    Apple is smiling all the way to the bank. What do they have in cash — $19.5 billion?


  •  
    mollytjm
    Jul 23 11:52 AM
    thank you for a sane article. geez! how can people compare the old apple computer company to Apple today. Yes, he's a genius and he, thankfully, rescued the company... AND built a company so strong, so diverse, so admired, so debt free and rich, that it will survive almost anything, even if he leaves.
    remember Walt Disney? everyone said the company would die with him. it didn't, because he also hired enormously talented people..and a lot of them! same here!
  •  
    Toni +
    Aug 06 10:06 AM
    What about the 300 by year end ?
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