A Significant Product Differentiation

Ben Bajarin / May 15th, 2013

Philip Elmer-DeWitt is calling him the man who figures Apple is worth $240 a share. I read his blog post and dove into his theory of ROIC. Something he said stood out to me.

Without significant product differentiation, Apple cannot maintain the ultra high profit margins and ROICs.

I don’t know about David, but I consider iOS a significant differentiation. I believe in Apple the company. It is just becoming harder to believe in Apple the stock.

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio
  • steve_wildstrom

    Trainer’s numbers make no sense. Apple reported net income of $41.7 billion for fiscal 2012. Trainer giver Apple’s net operating profit after taxes (NOPAT) for 2012–he doesn’t say whether it is calendar or fiscal–at $10.8, while the official and Trainer profit figures for 2011 were nearly identical. Without some explanation of this plunge in profits in a year when profits soared, his analysis is total gibberish.

    The amazing thing is that market opinion toward AAPL is so negative that people believe this nonsense.

    • Rich

      Steve, I’m mystified by the market’s negative opinion of Apple.

      I can think of two possible drivers of the negativity: a drop in the stock price in the past year, and the idea that “with Steve Jobs gone, Apple’s days of major innovation are over.” For the first one, I know the stock price fell significantly in the past year and perhaps this could be spooking investors, many of whom don’t seem to be willing to think any further than one month into the future. The second one is unknowable, and that opens the door to the possibility that it’s true.

      Then there’s the question of whether the market is taking a calm and balanced view of Apple, or is driven by emotion such as envy, or a fear of bigness and power.

      So we have several possible forces at work here, and I don’t know how much importance to assign to each one.

      • Sunil

        Even if it is true that Apple’s major innovation days are gone , the current Apple Management team can surely deliver on the type of services and results Amazon is delivering for the foreseeable future. So the reason for this negativity about Apple stock is surely something else. My best guess is that something about Apple’s way of functioning is a threat to some established market behaviours/practices/power centres. Therefore this concerted attempt to get Apple down with a hope to get it to change its behaviour / practice .

        • Rich

          That’s an interesting guess. Thanks.

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