“Apple reported strong second-quarter earnings on Wednesday, exceeding Wall Street’s expectations,” Aarthi Swaminathan reports for Yahoo Finance. “But the street is missing a ‘critical’ piece of the puzzle, says one expert.”
Swaminathan reports, “‘If I look at the broader analysis across Wall Street today, I think that there is a critical missing piece specifically about what’s the proper multiple to put on this company,’ Gene Munster, Loup Ventures managing partner, told Yahoo Finance’s ‘On The Move’ Wednesday. ‘The key distinction here is that investors typically think of this as a hardware business. Understandable, given that 80% of its revenue is hardware. But keep in mind, 35% of earnings are services-based and over the next few years, the company is progressively going to start to sell a hardware as a service.'”
“The fact that the company is going ‘down this path’ of becoming a services-based company requires a ‘rewriting of the multiple,’ said Munster,” Swaminathan reports. “Because soon, ‘this 70%-plus kind of upside that we expect in the stock over the next couple of years, really assumes what we think is a consumer staple,’ he said. And that means Apple — in the near future — could become a ‘Coca Cola 22 times type of a multiple,’ said Munster.”
Read more in the full article here.
MacDailyNews Take: Munster is right. Apple’s PE ratio is currently a laughable 17.71. Investors still don’t get it, but, hopefully, someday they might as the numbers become too obvious and large to continue to ignore.