Snow White and the Apple Analysts

“The only explanation for the ridiculously low price to earnings ratio of Apple is that analysts are living in some sort of fairly tale,” Eric Whiteside writes for The Motley Fool. “Perhaps they have all taken a bite of Snow White’s apple and there are not any princes who wish to kiss them.”

“Apple is a company that manufactures much loved products and has an enviable history of coming up with innovative new products. Microsoft is a company whose products are mostly tolerated by their users and the company has a long history of developing products that are total flops,” Whiteside writes. “Apple makes products that people want to buy. People want to find alternatives to most Microsoft products. So why does Microsoft trade at a price to earnings ratio of 15.83 and Apple only trade at a P/E ratio of only 9.56?”

Whiteside writes, “Consider that Microsoft is expected to see 5 year earnings growth of 9.03% per year. While, Apple’s earnings are expected to grow at rate of 18.98% per year over the same period of time. How does a company with an expected annual earnings growth of 18.98% rate a P/E ratio of only 9.56? Shouldn’t Apple have at least the same P/E ratio as Microsoft? That would price Apple’s shares at well above its all-time high.”

Read more in the full article here.

[Thanks to MacDailyNews Readers “Fred Mertz,” “JES42,” and “Rainy Day” for the heads up.]

13 Comments

  1. …and the fools, dips, dopes, media, that listen to these “analysts”.

    Goes to show that no matter how smart you may appear, Apple knows what they are doing. They aren’t doing it for the quick and easy. Have faith in the walled-in garden.

  2. The apple was not Snow White’s. it belonged to Claudia Elisabeth von Reichenstein. Snow White only took a bite from it. Now, how is that trademark for that little divot.?

  3. surely the question is rhetorical for anyone capable of independent thought, anyone outside of the herd – or as it prefers to be known, the collective. the genuine ‘individual’ is always marked, censured, punished (bullied), despised and (secretly) envied by the ‘group.’

    Apple is fiercely, dare i say proudly?, individualistic. as such, it chooses not to mortgage/discount it’s freedom by feeding at the same ‘entitlement’ trough as the pocket press (ny times), the walleyed investment anal-ysts (pick one) or the often jugular judges (everyone luvs Lucy). this evil triumvirate, as coordinated as a pack of hyenas, are continuously probing Apple’s jugular.

    Apple thinks differently, it is the best, perhaps the sole american corporation that unabashedly revels in pure capitalist dna, which is why it creates gorgeous, high-quaqlity, innovative and most important, ORIGINAL products. Apple’s motivation is elementary: pleasure and profit.

    the illuminati, dedicated since its inception to a one world government, devised a two-pronged attack:eliminate nation states and destroy Christianity. even Scripture cedes them temporary victory for the former but the latter will be their ultimate rock of offence.

    why? Indeed!

    1. Except it seems that the Harvard Business elites have taken over Apple so it now plays on the same “streets” as Microsoft by leveraging stocks and bonds and playing money manipulation games around the world. Now that it has become a slave of the Bond Market, its P/E ratio will go up.

  4. The market believes Apple’s future success is tied to the iPhone, and that marketshare ultimately matters most. Since the iPhone will eventually settle into its own place in the market, one where Apple will make an acceptable continuing profit over competing for commodity phones, it will never achieve the largest phone marketshare. The iPhone will simply be another of Apple’s successful devices, and the company will move it into iterative improvements in its ecosystem and move on to its next great thing.

    Apple is a technology company interested in making the best of breed of a product that the marketplace has screwed up, and integrating it vertically with its software prowess to produce a must-have device or service. Long term customers know this and lust for its next great thing. Bean counters don’t believe Apple can continue this trend, and undervalue it. Investor indecision about whether Apple’s DNA is for real and will continue to pull the rabbit out of the hat every few years causes the day to day volatility.

    So, the question is whether Steve’s culture of hard work, innovation, and focus on customer satisfaction will continue driving profits, or whether traditional business-minded members of the board will move into ascendancy and destroy this culture for a quick quarter return.

    I’m a 30 year Apple customer and that last possibility scares me intensely. Tim’s by all measures a polite guy. He’ll never fire an employee who dared to say the wrong thing in the elevator, or have a tantrum in the board room to get his way. He doesn’t have the cachet of the company founder to get away with it, and anyway, it’s not his way. He’s just the senior employee, and must maintain his status by performance alone. The relationships he builds with the executive team will determine his fate, and ultimately, Apple’s.

    1. I’ve read that employees say Tim is much tougher inside Apple the he is when speaking outside. You forget he has two high profile firings under his belt; Forstall and Browett. Tim’s demeanor is quiet but I think he really gets what Apple is about. One of Steve’s greatest endeavors was making sure Apple would not be run into the ground by the accountants.

    2. Also in Steve Jobs bio, Tim Cook has story of a problem in China and all his execs are in meeting and when the issue is brought up the exec responsible gives the reason for the problem. 30 minutes later Tim Cook looks at the exec and asks why are you still here. The exec immediately gets up and gets on a flight to China to resolve the issue. I think this example is a great illustration of Tim Cooks no compromise attitude.

  5. Apple’s P/E ratio is just something I don’t understand. Only in this last week or so has it gone up. Over the past few years it’s been steadily dropping, even before the rise of Android. Even as the company was gaining market share in desktops and mobile devices. Even as more Apple devices were being used in businesses and the enterprise. It’s like Wall Street is always saying that Apple has no future. It’s more than just slowed growth because at least the P/E would have remained stable, but instead continued to fall. I kept thinking that Apple must be doing something wrong in that it didn’t know how to show Wall Street the company had a stable future. Other companies managed to raise their P/E ratios, yet Apple couldn’t. Why should Apple have been so different. It didn’t get to become the top market cap company for no reason at all. One would think that alone was enough to prove the company had some future. With Apple’s huge cash amount, it could start at least a couple of more side businesses if that was the case.

    To this day, I can’t understand why Microsoft is believed to have a brighter future (per it’s higher P/E ratio) despite being almost completely cut out of the mobile industry and watching the PC industry practically flatline while Apple is riding the crest. There are just some inequities I really don’t understand. Netflix has a super-high P/E ratio and yet that business could easily be cratered by a company like Apple if Apple chose to get into the streaming content business.

  6. I thought Apple was cheap when it was at 700. Of course it’s hard to say that now. Even if Apple had a parabolic move I never really thought it got the love it deserved. Even at 700 it wasn’t fully valued.

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