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.”
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.]