An historically high PE ratio for Apple (AAPL) shares point to a possible correction, InvestorPlace contributor Will Healy surmises.
Although Apple remains an excellent long-term choice, investors should prepare for a pullback… I admit that in many ways, Apple does not get the respect it deserves. For one, it has tended not to attract the high multiples of its peers. Its average price-to-earnings (PE) ratio over the last five years comes in at 15.75. Now, its forward PE comes in at about 18.8.
However, seemingly everyone is bullish on Apple at the moment, and that gives me pause… Recall that Apple tends to pull back when the PE ratio approaches 20. Measuring by the current PE of more than 23.5, we have significantly surpassed that point. Also, at a forward PE of 18.8, we have moved close to that point from the perspective of future earnings. With 9.9% earnings growth expected for this year, I see little reason to believe we will see any long-term multiple expansion.
MacDailyNews Take: Apple’s PE ratio has been historically low compared to where it should be had analysts in general understood what they were looking at, instead of valuing it like a hardware company or based on iPhone unit sales or some other myopic metric.
This is not to say that Apple shares won’t pull back at some point as the market is, above all things, fickle, especially as it pertains to Apple.
Invest in AAPL for the long term… Then pullbacks don’t matter so much. Use volatility as an advantage. Buy more after a significant pullback (and then hold). When it comes time to eventually sell and realize the paper gains (to do something important), pick a time when AAPL is reaching new highs. Like right now.
Yes, it will. It will then rise again.
The P/E ratio is close to 24 which is probably the highest it’s being for over a decade.
At some point a large profit taking will occur. Could be at earnings time. In the past negative comments start to build up to trigger the momentum down.
In 2007, Apple briefly had a P/E of 38. It must have been when the iPhone was introduced which was a positive inflection point for Apple. After that, Apple became valued as a steel mill going out of business. Not befitting a tech company, at all. It’s what I had gotten used to all this time and didn’t think it was ever going to change. Maybe I was wrong and there is hope for Apple’s value, after all.
Ummm…. Shortly?
At some point, it’s going to pull back. Though, I think positive Apple TV+ and 5G news will keep aapl from falling for a bit. I’ve owned this stock since 2000. You just add when you get the big pullbacks or you can play Calls/Puts to gain during the Volatility One thing, you can’t fight the momentum. Just because of historical P/E hasn’t been this high, aapl still isn’t expensive compared to its peers.
I’m thinking it will be an iPhone scare that will again trigger investors into dumping Apple. There has been talk about iPhone sales falling 35% in China and I think that’s enough to send Apple stock into a tailspin. Apple investors are easily spooked when it comes to iPhone sales. If that 35% decline is actually true, then Apple stock is going to take another big fall. It certainly sux but Apple’s volatility is something that can’t be controlled. I’m focusing on long-term, so I’m sure Apple’s stock will recover, no matter what.
Yeah, you never know. I hate the “channel checks” because they are usually way off, but they usually send the stock down. I kind of think we won’t pull back too much until September and it’s sell on the news. Hopefully, aapl forms a nice base.
When the next split happens.
There won’t be any split. Apple has spent to much time and effort to reduce the outstanding share count and a split would put Apple’s share count right back where it was a few years ago. So, I don’t want that to happen. I’ll take a minor share price dip, instead.
I’m getting nervous thinking about it. It just seems to happen when I least expect it. Everything will be going smoothly and then the big investors start to panic when they hear some vague rumor. Then it’s time to dump like crazy so some big investors aren’t left holding an empty bag. It won’t make a difference to me as I’m getting my quarterly dividends, but I do find it annoying as to why Apple has to get hit while Microsoft and the FANG stocks will be left untouched to keep going higher. I’m not going to lose sleep over it and whatever happens will be just another blip in my long period of Apple stock ownership.
If history is any guide, AAPL will pull back substantially immediately after I buy some more of it.