“Apple has a problem. The opposite of Facebook’s problem,” Nancy Miller writes for TIME Magazine. “It’s undervalued and likely to stay that way.”
“That’s pretty surprising given that, even after the death of its visionary leader Steve Jobs, Apple has continued on a path of unparalleled profitability,” Miller writes. “In the second quarter, earnings surged 94% to a record $11.6 billion — more than three times the annual revenues of Facebook last year and 11.6 times Facebook’s earnings.”
Miller writes, “Yet the stock price simply does not reflect that success. Yes, Apple shares are up 40% this year, even after losing some ground since April. And it is the biggest stock by market capitalization — more than $530 billion. But by at least one measure Apple looks to be significantly under-appreciated by the stock market. Its price-to-earnings ratio for 2012 is just under 14, which means its stock price is 14 times greater than its earnings per share. For comparison, consider that the average P/E for all the stocks on the S&P 500 — the stinkers as well as the stars – is 16. Facebook’s P/E is about 100, depending on how much it earns this year. Amazon’s is about 176.”
Much more in the full article here.
Maybe it’s because the stock market is run by dumbasses?
or, it’s run by some very smart ppl that know how to pump aapl like a piston.
At $566 per share today, it seems like and odd article title.
Maybe it’s because the stock market is manipulated by heavy hitters who have found THE stock people love to hate/fear.
Some people are making a FORTUNE on all this speculation and others just play right into their FUD.
But you can’t keep a good stock down. You’ll see. Just like the objective analysts are predicting: $900/share by the end of this year. iCal it…
I think it’s because Apple has so few hardware items. People are looking past iTunes and the App store and focusing on the iPhone and iPad sales and earnings juggernaut. A misstep on a product launch and the future year or more will be substantially impacted. I don’t like it, I think there is more stability there, but the fact remains of the revenues generated by iPhone and iPad. No getting around it. If a third industry is disrupted, then, I think Apple will be sufficiently diverse that the share price will move dramatically.
And this kind of thinking is why. You’re already primed to be manipulated.
1) apple could come out with ten more major products that were as profitable as the iPhone and they wouldn’t be diversified. Because they’d still be operating in the same economic sector.
You’re suggesting they get into making soap and motorcycles too?
2) your mind is already made up and is just primed for the next FUD to come out and make it panic. Like a good little patsy.
Just do yourself a favor and invest in CDs.
I agree.
WHen gil amilio was CEO apple was making about 6 different computers and going broke jobs first act was to kill 5 motherboard designs and unify the product line same motherboard different displays big profits
In 2003, when I purchased my new PowerBook G4, Apple was at $27 a share. It’s now $568.21, and that is after a split of 2 for 1 when it had reached $80 way back when. If I had been smart, I would have cashed in my worthless whole life policy and invested $20 grand in Apple. I’d have a portfolio worth over $500,000. I’d say Apple is getting plenty of respect. It’s about the long haul.
Don’t get hung up on the share price it means nothing. Apples P/E ratio is pathetically low for a company with their earnings and growth.
Its a high risk stock. Their growth is highly dependent on them comming up with the next big thing. They can not coast around like MSFT for ten years.
Actually they can. Microsoft was able to coast for so long and still can because they built an ecosystem around their OS and Office platform that could not be touched by anyone else in the business market.
Apple has done the exact same thing with iOS in the mobile market. Android may be installed on more devices like Windows is, but Android lacks the cohesive ecosystem that can only be accomplished when one vendor has control over a platform. The Android market is a mishmash of OEM’s using different versions of the OS. Microsoft controlled what version of Windows was available to OEMs, it also controlled what those OEMs could do with the platform. This allowed for a stable compatible platform.
Apple doesn’t have to create new exciting products to stay relevant. All the have to do is be capable of adapting to market shifts, which they’ve proven with iPod->iPhone, and creating new device categories, the iPad. The issue with Apple is can they keep selling more and more devices? There is no reason not to believe they can’t. Content creators, developers, 3rd party device makers, 3rd party accessories manufacturers… these are all multi-billion dollar markets built around iOS. These can sustain and drive growth in a platform.
If people want to look at Apple’s real value, they have to take into account these other markets and factor in the amount of money being made there as well. This is the iOS economy and worth a lot more than what Apple files in their quarterly reports.
This is how and why Windows has stayed relevant and a market leader for so long.
Maybe it’s because Apple currently derives 80% of its revenue from just 2 products (the iPhone & iPad). The market wants to see if Apple can maintain its impressive sales growth and build a more balanced revenue model before they risk too much money buying too much Apple stock. The bigger you get the harder it is to stay there. The higher the stock price the higher the risk for big money investors.
Apple derives 80% of revenue from a single platform, iOS.
Microsoft derives even more from a single platform, Windows.
If you just look at “devices” you’re being very short-sighted. Yes, Apple makes its money from selling hardware, but that hardware is just a means to an end, iOS. A majority of users who own these devices are also buying into the platform. That’s what drives growth. The number of devices Apple makes isn’t relevant.
Take Android as the antithesis to this; no body is making money from this platform even though there is a larger “user” base. Why? Except for a handful of techno-geeks, users aren’t interested in the platform-they basically own a phone, that allows them to get on Facebook.
Apple is a company designed from it’s inception to come up with “the next big thing”. Job’s legacy to apple was to ingrain innovation firmly into apple’s operational DNA. To suggest that a technology company is a risk because of “invention block” is Fscking stupid.
People don’t understand Apple. It has hit critical mass. Because of the genius of Ivy and his team Apple will grow for many years to come. It will be the first market cap Trillion dollar company. There is nobody close. HP and Dell are just farting in the wind. Google could be there only true competitor.
Apple is the only company pushing the envelope.Everybody else is waiting to see what they do.
I agree that the risks should bring the P/E down, but more like bring it down from 40 to 30, considering the growth that it demonstrates quarter after quarter and year after year. Having a P/E under the market average is incredibly stupid but an equally incredible opportunity for those who know how to play it.
Apple needs to split the stock. True Investors can’t really accumulate many shares of a stock this expensive. It is perfect for manipulation by Hedge Funds and Traders that concentrate on Options. A brief, heavy, short selling attack that runs the stock down enough to knock out the average investor’s stops, will net a $10 to $20 decrease. Buy puts, run it down, cash in, buy calls, run it up by covering. It’s a license to steal. Split it 10 for 1, and the stock will become a stock that investors accumulate, instead of a yo-yo for the Hedge Funds.
You might be right about a split. I have countless friends who would buy AAPL if it was $57 a share. The big share price scares retail investors.
That’s easy to respond, it is because apple was born to make the best products on the world for the end user, not the best stock for the greedy people.
Apple’s priority is to make insanely great products, not to make people rich.
The truth here is found when you follow the money… Wall Street makes its money these days from trading on its own account, and to be successful they need inside information. Apple is notoriously secretive, so insider trading in Apple stock is tricky. Also, Apple doesn’t need to raise funds on the market – another lucrative area for brokers. Lastly, Apple doesn’t wine and dine the analysts – so they feel ignored… There is no money to be made on Apple so the stock is not promoted by Wall Street. Like every other aspect of life in modern USA, the stock market is completely corrupt.
I have been an apple fan and investor for 6 years without complaints. However, if there is one issue that I wish Tim Cook could fix, chronic low P/E and undervaluation would be it.