Apple is, at this point, sort of like Alabama. They’ve been so good for so long that the press in both cases just can’t wait for some imagined comeuppance, and so the new pattern we see after every Apple event is a litany of folks explaining how much the company has lost its way post-Jobs, and how it’s obviously drifting and leaderless, and how they’re completely over. Indeed, after the event yesterday, Apple shares fell 5%, and they remain significantly below their 52-week high of $705.
Well, if this is what “over” looks like, I’ll damn sure take it. Apple remains one of the most profitable companies in the world — in fact #2, behind Exxon Mobil, and the dollar gap is less than 10% despite the fact that Exxon has 2.5 times the revenue of Apple. They continue to sell just about as many phones, tablets, and laptops as they can make. As a consequence of being a money-printing machine, they’re also sitting on a cash mountain of about $147 billion.
And yet, as I write this, a single share of AAPL sells for about $470, which values the company at only about $427 billion. That’s still enough to make it the most valuable public company in the world (ahead of Exxon, Google, GE, etc.; its old rival from Redmond is waaaay down the list), but it strikes me as low.
Why? At this price, the firm’s P/E ratio is 11.7. That’s a rate that implies an over-the-hill firm in a mature market (e.g., it’s not far from Exxon’s P/E, or Microsoft’s). And note further that this ratio includes in the value of the firm all that cash, which (when factored in) would depress the P/E even further (to less than 8, if my math is right). That’s absurd in a world where Apple prints money at this rate. Google’s astoundingly less profitable, and its P/E is 26. Even at Apple’s lofty $700+ price per share last year, its P/E didn’t suggest it was too expensive.
I’m certainly no investment advisor. Make no mistake. It sure seems to me, though, that nitwits claiming Apple is over are riding backlash and not meaningful analysis.