MacDailyNews Take: An aside: Think about AAPL ten years ago. “Most widely followed stock on Wall Street” it was not. It’s amazing how far Apple has come!
Schwarz continues, “The current perception among traders is that Apple is expensive because of its 150% rally off of the March 2009 lows. Seriously, if I polled 1000 traders I believe that 95% of them would look at the 33 p/e ratio on their screens and tell me that they’d love to own Apple but it is just too expensive. What they don’t know, is that the 33 P/E is about to drop significantly and will set up the opportunity of 2010.”
“Since 2003, Apple has consistently traded at an average P/E ratio of 32.17 which is consistent with today’s current P/E of 33. You can tell that traders have done their homework and are strict followers of the P/E valuation. If you’re like me, you don’t care too much about current P/E ratios because they are calculated from past results. The number that really matters is the forward P/E ratio because it is calculated from future estimated earnings,” Schwarz writes.
“Well, the average forward P/E ratio for Apple since 2003 is 22.48. Any guesses what it is now? Based on the new accounting rules soon to be put in place, and the 37 billion in cash that Apple has on their books, Apple’s forward P/E is below 13,” Schwarz writes. “This stock has not been priced this cheaply since Steve Jobs came back to Apple in 1997.”
“Based on expected earnings per share of only $11.70 in fiscal 2010 (many think earnings per share according to the new accounting standard will end up closer to $13) the stock should be priced at $263 today and should reach $376 by September 30, 2010. These prices do not reflect great years for Apple, they simply reflect the averages,” Schwarz writes. “You want to know what a great year would look like on September 30, 2010? Let’s use the P/E ratio from just before the recession began in 2007. With the iPhone added to the Mac and iPod lines, Apple stock was soaring. Its forward P/E was 28.63 and its current P/E on September 30th 2007 was 39.05. If we used those ratios in 2010 it would put Apple stock at $456 by the close of its fiscal year on September 30th.”
Full article here.
[Thanks to MacDailyNews Reader “Mike in Helsinki” for the heads up.]
Can anyone tell me how I can borrow $50 million so I can get in on this expected rally?
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@Predrag
I don’t think “getting married to an investment” necessarily means long term investments. “Getting Married” refers to the people that fall in love with their investment and hold onto it through thick and thin, till death do us part. That kind of investment is foolish. AAPL won’t love you back. There is a time to buy, and a time to sell. Both of them are always opposite of what is obvious. Apple is at an all time high. It’s time to sell.
And I know good and well that there is an earnings call coming up soon. Goldman Sachs and every other hedge fund knows it too. That’s why they have been buying up all of the available shares. But, again, Apple doesn’t pay dividends. That means that the only money you can make off of AAPL is in the perceived value of the share. Hedge funds that pushed that to record levels and have their computers more than ready to sell it off at the first sign of volatility.
It’s time to sell.
Dallasm:
You’re the ultimate and not last idiot trader who chases their tail trying not only to time the market, but also tell others how it’s done- While you’ve been talking shit here all day and telling everyone to sell, I hope you sold and lost a $7 rise from the day’s earlier low.
You must feel real smart….
If you want to make money quit trying to time the market. You only lose your commissions, and your hair. I bought AAPL on March 1, 2001. Since then I have sold three times. The first time I just wanted my original investment back so I could feel I was only “playing with profit.” The next two times my remaining AAPL had grown so much that it would start to overwhelm my portfolio and I felt I should diversify and not hold such a big proportion of just one stock. Each time was the biggest mistake I ever made. Fortunately I still hold the bulk of my original shares, up around 2000% today.
I bought AAPL and hold it because I believe in its products not because I thought I could predict its stock price. I use Macs almost exclusively and have converted many friends. It’s good for me and it’s good for them. The day AAPL starts making shit products I will sell all and never look back. Until then I just hold.
More recently I have made similar investments in clean energy stocks. I do this for the same reason— because I believe in the products, feel they are superior to the competition, and use them whenever I can, not because I believe I can predict the stock prices. In truth, if clean energy industries do not grow dozens of times over in the next 20 years, we’re all as good as toast anyway, or at least our kids are. So I think of my clean energy stocks as my kids’ college funds. They are my investment in the next generation.
The climate change deniers of course like to call out environmentalists who invest in clean energy for our “conflict of interest.” To me that makes about as much sense as saying I had a “conflict of interest” when I bought AAPL at $22 because I believed in the products and wanted to support them. Invest in something you believe in… besides money. If you only believe in money, you probably won’t make any.
“This stock has not been priced this cheaply since Steve Jobs came back to Apple in 1997.”
So who thought there was any sign of intelligence in the stock market?
Buy buy buy.