This chart starts at the time that the TabletPC was introduced by Microsoft (MSFT) early in 2002. I bought one three years later and it died a few weeks ago. That’s why you haven’t seen any of these charts with words scrawled on them of late; I had nothing to scrawl them on.
The top panel shows the annual growth in sales and net income, while the performance relative to the S&P 500 is shown at the bottom. That shows a recent spike up and spike down, as shareholders cheered the decision by Steve Ballmer to leave, only to be chagrined when he announced another questionable acquisition shortly thereafter.
A full eight years after MSFT’s tablet operating system, Apple (AAPL) introduced the iPad. The bonus chart below takes a look at the company’s performance over the last few years in the eyes of the analysts (now 65 of them, according to Bloomberg) that cover it.
While MSFT’s story was one of possibility and disappointment, AAPL’s was pure magic, causing all sorts of distortions for investment professionals.
As measured by the distribution of ratings on the stock, sell-side analysts have stayed very optimistic over the last year, despite a price decline of 44% from the top to the bottom.
But if you study the chart, you’ll see some interesting things. Obviously, everything was onward and upward for quite a while. Then the earnings estimates (in the top panel) started a persistent downtrend for a time (punctuated by disappointing quarterly reports). Now they have been going sideways for a number of months.
Look at when the downturn in estimates first began and see what was happening in the panel below. Despite the lower earnings expectations, the stock moved up and analysts started raising their targets again in response. Even though AAPL was selling at a low multiple, it’s hard for a stock to move higher in the face of declining earnings expectations.
In any case, let’s hope that my new tablet will last eight years like the previous one. Who knows who will be king of the hill then. (Charts: Bloomberg terminal.)