Is Apple a $17,000 stock?

“While there are no $17,000 price targets for shares of Apple (AAPL) (yet), with the stock topping $500 per share on Monday, there is a vigorous debate as to what price the stock should realistically trade at,” Bespoke Investment Group writes for Seeking Alpha. “Is the current price overvalued, undervalued, or fairly valued?”

“At times like this, it often helps to compare the stock in question to similar stocks to see how they are valued,” Bespoke Investment Group writes. “At a current price of $502.50, Apple trades at 11.8 times this year’s expected earnings. The S&P 500 now trades at 13.5 times earnings on a weighted basis, while the average P/E ratio of the 500 stocks in the index on an unweighted basis is 17.7 times earnings.”

“Let’s just assume that given its phenomenal growth rate, that Apple were to trade at a valuation similar to the Technology/Web stocks in the S&P 500 with the highest multiples. Currently, the three stocks in similar sectors to AAPL with the highest P/E ratios are Amazon (AMZN), Salesforce (CRM), and Netflix (NFLX). These stocks have multiples ranging from 78.8 times earnings (AMZN) to 422.5 times earnings (NFLX),” Bespoke Investment Group writes. “If AAPL were to trade at a multiple similar to any of these names, the stock would currently be massively undervalued. Based on AMZN’s multiple, AAPL would trade at more than $3,300. If it had CRM’s multiple, the stock would trade at more than $4,000 per share. Finally, if AAPL had a multiple similar to NFLX, the stock would trade at just under $18,000 per share!”

Read more in the full article, plus see a table of the P/E ratios of comparable stocks to Apple along with theoretical AAPL share prices, here.

[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]

31 Comments

  1. Everyone has a much harder time believing Apple can double, triple, quadruple, and quickly, when it’s at a big intimidating number like $500. But Apple has quintupled in value in the last three years. If it were to do that again that put’s it at $2,500 right there. No one had a hard time imagining a stock like Apple could go from 30 to 100 in the iPhone launch days. But it’s indicative of the failure of human imagination that at this number people only dare to see percentage growth under 100. It’s growth has only just begun. There’s never been a company like it.

    1. If you look at TROUT multiples for even conservative LEMN extensions, it’s easy to see AAPL shoot up to $1125 in 2013. Of course, that assumes a continuation of positive BUN.

  2. The question should be why are Amazon and Netflix trading at such high multiples. Is prospective growth that likely for them? Personally I think Netflix in particular will come down with a bump at some point.

  3. A stock split would really help with the perception that the stock is “expensive”. Most people don’t understand the difference between the stock share price and the underlying value.

  4. Very true, a stock split say 2 or 3 for 1 would likely generate extreme interest in the stock even though nothing really would have changed in the stock value and p/e going forward.

      1. And not 2 or 3 for 1, but 10 for 1. That would make AAPL $50 a share, something the average (non-stock-savvy) Joe would see as a reasonable price. I have a few friends & relatives who won’t buy just because they think it’s too pricey at 400-500 bucks.

    1. Agree, stock split + dividend is the way to go. Apple needs to do the dividend, it has simply too much cash on hand and is generating a great deal of cash each month from operations.

      I’m not saying a quarterly dividend, a one time dividend though would better reward shareholders, and along with a stock split, would attract more individual investors instead of so many institutions.

      1. Apple just needs to buy the company back. They don’t need to split the stock because they don’t need cash. Even if the stock crashes, it will be better and cheaper for Apple to buy it back. It won’t stop the fact that they are making insane amounts of cash. They have no debt to service, they have the cash to buy whatever they want. Apple loves to control everything, and getting rid of shareholders and anyone else with a greedy outlook would just have to cash in and move on. It is in Apple’s DNA to buy back as much of their own company and make it private again.

      2. without putting a dent aapl can announce $20 per share ($5 per quarter) and $20b share buy back per year. That is a cost of $39 to $40 billion dollars per year and still cash holding will go up by about 10 bilion dollars per year. If this happens then share price will be close to $1,200 by end of 2012

  5. As usual, people have too much time.
    However, we all know, apple is about margins not market share. Thus to compare with those so called P/E leaders like amazon is BS.

    You really want an AAPL , with less margin , less great products ?

    I DONT THINK SO.

    Keep going guys, and if need be, make a stock split for other people to also start buyng apple stock.

    Hands of a dividend, it only leads to externally driven and motivated decisions by money interested people instead of product interested people.

    Cheers

    Han

  6. I keep reading about this “need for stock split” or “need for dividend”, but I can’t find an answer to the obvious question: Why would Apple want to attract some ignorant average Joe to invest? Why would Apple need to additionally attract ANYONE to invest?? Is AAPL inadequately growing? Those who own AAPL shares, are they unhappy about the way the stock has performed over the past 1, 3, 5, 10 years???

    To suggest a split (incredibly dubious action with absolutely no value or consequence for stock) or a dividend implies acknowledging that the stock is NOT performing well, or well enough. If THE largest market cap on the planet that grows over 30% per year for almost the entire decade can be considered under-performing, then I would like to see a similar large-cap stock out there that has out-performed AAPL.

    Apple simply defies all the possible rules of the stock market.

    1. Yes, thank you for posting this. People sitting around complaining Apple is too expensive have no clue about investing and shouldn’t be putting their money in the stock market. This isn’t Vegas.

      Trust me the exact same people who say its too expensive at 500$ were the same people saying it was too expensive at 250, and 200.

      I’d also love to know how many people who are CONSTANTLY advocating for a stock split even own any shares.

      1. If you want a diamond, you can’t get it at the price of a bronze ring. Anything that is easy to get is also easy to dispose of. There is no sentimental value in being cheap.

  7. Everyone is assuming that the stock won’t split. No one is going to allow a stock over $1,000, or maybe even $600. If they did, then IBM would be thousands of dollars. (Don’t have time to do the math right now.)

      1. Even BRK.B (the cheapo stock, for ‘average Joe’ investors) has been up to about $4000 until fairly recently, when Buffet decided to make it affordable again (and split 50:1). And that is for a stock that has 1/10,000th voting right of a proper, full share. And the only reason it exists is so that stock holders can give it as a tax-free gift (IRS has some $10k limit for tax-free gifts). Those who have BRK.A can break it up into 1,500 shares of BRK.B (but not the other way round).

        There is no value in split. Not until the stock exceeds the IRS tax-free gift limit.

  8. Apple doesn’t really care about the shareholders, because they know the shareholders would push them off the cliff at the drop of any negative hat. Instead, Apple cares about and is having fun inventing new products that appeal to the masses. They’ve got more money than they can spend and are just focusing on kicking butt with new innovations and reinventing the wheel…the money is taking care of itself.
    If you are expecting a dividend or stock split, then don’t hold your breath…ain’t gonna happen.

  9. Apple should use some of it’s hoard to buy back it’s own stock. Let’s face it, could Apple make a better investment?

    They could buy enough back to knock the price per outstanding share up where it should be right now.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.