I really like Apple. Steve Jobs may be the best CEO in America. Even while he was sick, Apple did great. They have the best consumer electronic products out there. Their computers are great. The I-Phone is in a class by itself. They have iTunes. I know that they will probably start to play in the netbook or e-book market soon as well. I just think the company has tremendous growth potential.
I really like Apple. Steve Jobs may be the best CEO in America. Even while he was sick, Apple did great. They have the best consumer electronic products out there. Their computers are great. The I-Phone is in a class by itself. They have iTunes.
I also believe that the market has not given them credit for areas of tremendous growth. Today the company trades at XX times trailing earnings, which is on the high side of its peer group, but that reflects the fact that the company is relatively underleveraged versus its peers. Even though I believe the stock is fairly valued based upon the company’s current mix of products, I think the market is disregarding their ability to play in the netbook or e-book market. The Kindle is contributing $xx million to Amazon’s operating cash flow. If Apple could achieve 50% of that, and I think they can do significantly more, that would mean $y billion in additional market cap at their current multiples. That means the stock should see xx% growth simply from the e-book market without even considering netbooks.
Too often when candidates are asked this question, their answer is limited to a qualitative analysis of the company. These qualitative aspects are important. If you read any equity research report, you will find there is significant time spent talking about industry and company trends; however, whether or not you like a company’s products / services versus whether you would buy the stock are two completely different things. If everyone in the world thinks the stock is great, then it might be fairly valued or over-valued. I like Google, but would I buy Google at $800 per share? Absolutely not. You buy stocks because you expect them to go up. Don’t focus on the details of the analysis I wrote above. That was simply and example. The point is that when answering this question, you need to apply some fundamental financial / technical analysis. At a minimum you need to address the P/E ratio and where it stands relative to its peer group. You should also think about price/growth, EBITDA/enterprise value, leverage ratios, etc.
Back to >> 5 Common Investment Banking Interview Questions That Most People Screw Up