Apple’s valuation could help COVID-19 economic recovery

Apple’s valuation could help the economic recovery after the COVID-19 recession.

“The COVID-19 pandemic may have hurt the economy, but for technology stocks it feels like 1999 again,” Sakunthala Panditharatne writes for Bloomberg Opinion. “The Nasdaq Composite Index just reached a record high having rebounded about 50% from its low of the year in March. The stock market is not the economy, but it does feel strange for stocks to be soaring in the middle of a deep recession.”

Image: Apple logoSakunthala Panditharatne for Bloomberg Opinion:

The difference is timescale: stock prices represent revenue and earnings very far out into the future, not today. If plans for new technology are sound, the outlook can still look bright even though the present seems gloomy…

Many people would put a high probability on Apple Inc. coming out with a new product, such as virtual reality glasses, but the company’s shares were trading at around a relatively paltry 20 times earnings through much of 2019, which amounted to not much more than future iPhone revenue. Although the ratio has moved up to about 30, that still seems low for a company like Apple and may be a sign investors are shifting away from valuing it just on iPhone revenue…

With an economy in trouble, the path back to prosperity depends on tech companies rapidly scaling up, generating revenue and creating jobs… So instead of criticizing high stock prices for tech companies, embrace and understand them for they may be the key to the economic recovery.

MacDailyNews Take: Yes, as we’ve been saying for many, many years, Apple has been and continues to be significantly undervalued.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

9 Comments

  1. Two major concerns going forward:

    Can services revenue make up for plateauing iPhone sales?
    How much will AR glasses cannibalise iPhone sales?

    1. I’m not sure this fully addresses your concern, but I believe we can agree that AR glasses cannibalizing iPhone sales is a better scenario than armies of zombies cannibalizing innocent people as they sleep.

      That said, AR glasses are similar to the watch, complementing the iPhone rather than replacing it.

      1. Perhaps, though I can see a Minority Report scenario where all interfacing is done through AR and gestures.

        Swapping iPhone zombies for iGlass zombies…

      2. With the reports noting the initial AR Glasses will rely the iPhone for maximized function, wouldn’t it be very plausible iPhone sales will increase? As well, the Earbuds are to augment the AR experience, so their sales #’s should increase as well. I have a harder time imagining how the A-Watch would “fit.” It seems redundant will all the info provided by the Glass/iPh combo.

        If Apple can design the the Glasses without the wearer looking like a borg, I think “ecosystem” will be redefined within the Apple world. I know many here can’t imagine the draw to the product, but if the borg prob is solved, they will be the biggest catalyst for growth since the iPh, imo.

  2. Due to expiration of unemployment stimulus, expiration of mortgage forebearance, eviction moratorium ending, and the lack of a second stimulus check, no stock will be immune from a crash, including Apple which is in the end, a luxury brand dependent on discretionary income.

    1. Conservatively, chances are 9-1 that more $$ will be granted. There’s NO WAY the Administration will go into the hot election period with foreclosure, unemployment and bankruptcy #’s climbing…w/o some action to calm. The #’s will likely climb regardless of the next infusion.

      Nancy and the D’s will seek to do the same as a voice for what Joe will do for the People. I heard she’s looking for a chunk o’ cash that’s north of 1.3 T.

      “All is well” until the until the next proposed infusion dries up.

  3. Some Apple bulls continue saying Apple is undervalued, but yet it remains undervalued for years and years, so I would think it isn’t undervalued if it always stays that way. I would think it’s valued fairly as long as the P/E stays over 30 which is pretty darn good. Sure, Apple will never be valued as much as Amazon, Microsoft or Netflix, but they’re not basically considered hardware companies as Apple is. I just wish Apple could be valued as Microsoft is, but that’s just wishful thinking. It will likely never happen unless Apple Silicon Mac laptops become a huge hit or AppleGlass becomes a product everyone wants (I can’t even imagine that happening).

    1. The Apple “secret” is out of the bag now, so everyone is paying attention to the fundamentals. The price is “fair” whether it makes sense or not. Also, MS’ PE is 34-ish so not much more than Apple’s.

      If only MS had held its 5% stake in ASPL!

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