Is Apple worth $12,000 a share?

“With stocks at or near alltime highs, financial publications and market pundits are providing plenty of hot air as they inflate a bubble by talking about a stock market bubble,” John Buckingham writes for Forbes.

“Even at current prices, I’m still finding attractive stocks. There are certainly many growth stocks trading for rich valuations, but the beauty of active portfolio management is that you don’t need to own them. For instance, if you look at the S&P 500 you see that one of its most popular components is Netflix, the video subscription service, which trades for more than 300 times earnings,” Buckingham writes. “Sometimes stocks do grow into their multiples, but I find Netflix hard to justify at these levels. Something much easier to digest is the modest valuation of a world-class franchise like Apple, which trades for 14 times earnings and also rewards shareholders with a healthy 2.1% dividend yield.”

Buckingham writes, “Believe it or not, if Apple were awarded the same earnings multiple as Netflix, the consumer electronics superstar would change hands at nearly $12,000 per share.”

Read more in the full article here.

23 Comments

  1. I’m a Netflix user, and, no way it’s worth 300 times earnings. There just aren’t enough good / new movies being added to justify any price increase in it’s service, let alone add compelling enough to add 10’s of millions of new users. With the demise of Blockbuster, video rental users have already mostly moved over.

  2. I cancelled my Netflix account. Stupid changes in policies. First, they changed from 6 devices down to 2 where you can view Netflix. Then, programming choices were reduced drastically so that the only choice you have is to upgrade to the “DVD Rental”. Stupid idiots at their management team. They could have had a life long member. I cut bait at three years.

    1. That is incorrect. Netflix has a 6 device policy with 2 concurrent streams. I haven’t come across an issue but when errors occur it may be due to exceeding the # of streams.

      They are trialing offerings with 2 and 4 devices with no restriction on streams. I do see an issue with this in that I have more than 2 devices in a household (2 Apple TVs, several Macs and also iPads and iPhones).

      Netflix are obviously looking at ways to increase their revenue and prevent people sharing accounts. I agree that the later is unfair but they will need to be careful not to alienate their customer base.

  3. Netflix will never get to 300x earnings and may have a tough time holding its present share price this year. Amazon Prime Video is very good and you get all those other extras like free two-day shipping and Kindle owners’ lending library. The combination of all three beats Netflix cold as far as I’m concerned.

    Apple’s share price is dead in the water. Tim Cook can’t do a damn thing for shareholders. The company is constantly being downgraded and the share price continues to fall. Investors either hate Tim Cook or have absolutely no confidence in the man. I can only hope Apple is actively buying back shares at this point and possibly considering increasing dividends.

    1. Stated as if you have special insight or it’s a fait accompli. I beg to differ based on speculation of new product lines and larger devices. I do believe 2014 will see Apple get more stock respect though certainly it hasn’t started off well.

  4. I have been on Netflix for 6 months. The bardes thing is finding movies or TV shows. All they real have is word search and half the time all I get for the movies I am looking for is a listing under “Movies related to”. I would hope they rack the searches so they know what movies ect to go after. Also the content providers are pulling back from Netflix as their previous contracts expire.

  5. A logical, well-reasoned piece from John Buckingham.

    That said, and the truth remains, dead money walking here. Stay away, far away from AAPL until something (read that “anything”) happens to dislodge analyst/hedge fund managers’ opinions about iPhone margin declines, competitor market share gains, China Mobile weakness, Tim Cook ineptitude, etc., etc., etc.

    There’s just no sense at play here, none whatsoever. Something much more unsavory is.

Reader Feedback

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