Wednesday, April 25, 2012

Missing the Point on AAPL

OK, so this is post number 3 on the same issue.  TRG has already made this case here and here, but now he feels the need spell it out, plain and simple.  AAPL stock is too cheap, and nobody seems to be noticing.  All the talk is about future iPhone competition, and margins that can not stay this high.  They are missing the point.  The stock will surely rise today, probably more then 10% based on pre-market activity.


Simple math will show it.  The current PE based on the April 25 close price of 560.28 and the announced earnings (past 12 months earnings are 41 dollars per share) is 13.66!  The current average PE for the S&P 500 is 22.5.  Based on this simple fact, 1 dollar earned at Apple is only worth 13.66/22.5 = .60 cents earned at any other company...  THAT'S STUPID CRAZY.

Apple is an exceptional company, and TRG would really like to believe that they deserve a commensurate valuation.  But lets be conservative and value them as an AVERAGE company:

41.02 X 22.5 = $922.95

There it is.  AAPL stock, with an average S&P valuation, should be trading at $923 per share.

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