Media Hype Over Apple and Technology Stocks
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I get up early. With two energetic daughters I had better if I want to get anything done. When I'm up early, I read the papers. This makes me old school, apparently, but I read them on the web. I think that helps.
Reading The Washington Post this morning, I was somewhat taken aback by the paper's business section. There are, by my count, six stories about Apple, most of them negative. The stories range from mundane coverage of Apple's new space to panicky ones about the death of the Mac and how the firm is facing a slowdown in demand.
The rest of the business section front page concerns more technology. Two about Vine, two about Google (one very positive) and some about Facebook and Microsoft. All the biggies. Honestly, I find it sort of dull. These are firms we mostly know about and I doubt they'll tell us much in the way of helpful information.
Still, it shows that established businesses with a good public relations team can keep themselves in the public eye. That generally means more interest and a greater impact on company's stock prices. That, as a former broker and reporter, is worth keeping an eye on.
Apple (NASDAQ: AAPL)
The technology giant has had a rough few weeks. The stock has cratered, dropping from a high of more than $700 per share to $439.88 per share in less than six months. Everytime someone over at Apple sneezes, the media reports that the company is going down the tubes with some dreadful illness.
Let me rip that illusion from you. Apple has hit a rough patch, but is still a very good investment. Everyone has now bet against it to such an extent that its EPS of more than $44 looks pretty attractive. The firm still makes good products, designs them well, and has a hugely loyal fan base. It also has a locked in audience for its media properties through iTunes. Once you buy from the Apple store it's hard to leave all your purchases behind and switch platforms. I don't expect Apple to rebound to $700 again anytime soon, because I thought that was too high, but I see no reason why, after the herd is done stampeding, it shouldn't recover and do well again. You should try to be a part of it.
Google (NASDAQ: GOOG)
I continue to be astonished at how well Google has executed a fairly simple business plan of selling a lot of advertising cheaply. They offer a great search engine, as well as other cool functions, then sell a godawful amount of cheap advertising against the billions of searches per day. There's more to it than that, of course, but that's where it started.
Still, no one can argue that it hasn't worked. Well, certain in the media can from time to time, but that's not personal, it's just business. Google is a solid company that limits its number of shares and keeps it's P/E and EPS in a good range for investors. The stock is up an amazing $180 in the last twelve months and the growth is there to make you happy. Even with it at $750, investors should think hard about getting some more. The company is constantly innovating and one of these days something truly astonishing is coming from it. Heck, it may have already and we just haven't recognized the game changer yet.
Facebook (NASDAQ: FB)
This is one where I'm totally behind the media pile-on, readers. I'm a user of Facebook. I enjoy it. But I have no idea how the firm plans to justify itself in the market. Sure, they can use information on their users (I can't call them customers) to target specific ads, but there seems to be a prevailing sentiment that Facebook ads don't work to drive customer traffic. The stories we hear about company's getting a positive client reaction on Facebook all center on companies that are reactive to customer complaints posted on Facebook, not on the huge return the firm brings from providing advertising. A terrible P/E of 293 doesn't really encourage me. I told clients who asked about it during the IPO to stay away, even when they were hot on it, and later they thanked me. You should stay away until Facebook has a couple of solid, profitable years. If you must put money into it, only put very risky cash into it. Don't put in anything you can't afford to lose.
Look, there's a lot of media hype about these firms. Heck, there's media hype about technology in general. But it's beginning to feel like 1998 again. I went through the build up and the crash. It wasn't fun. But few people place any blame for the boom on the role the business media and technology media (the two are not the same) played in boosting the dotcoms up beyond any reasonable hope of return. Be wise, don't let it happen to you this time. Look at technology firms with a jaundiced eye and demand they prove to you that they're a good investment before you write a check.
Follow Nate on Twitter: @natewooley
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