Why Apple Even Now Is Still Very Cheap
On a trailing price to earnings ratio, usually the most used metric in judging what makes a stock expensive, Apple sits at a very reasonable 15.5. Here is a chart of Apple's share price and P/E ratio over the last year:
Let's look at a few other tech companies for comparison:
- Amazon - 92.6
- Netflix - 65.9
- Salesforce - 420.9
- Google - 21.7
And those are just tech stocks. It gets better when you look across other industries.
The kicker is that Apple's revenue is actually still accelerating. Their revenue growth on a year over year basis is an astounding 82%.
Where do other tech companies stand?
- Amazon - 51%
- Netflix - 48%
- Google - 32%
- Microsoft - 8%
It's actually kind of silly when you compare these growth rates to the P/E ratios above. With these growth rates, Apple is still very much a growth stock. So it's no suprise that some analysts think its stock will reach $1,000. And he's not the only one.
Other than these purely financial metrics, here are a few other reasons why I am bullish on Apple:
- iPad's dominance of the tablet market - there still really isn't a “tablet” market — just an iPad market.
- The iPhone has no competition where it matters most — profits. Apple now controls over 66 percent of all the profits in the mobile space.
- iCloud - the first reviews in are positive. iCould should drive people to purchase even more on iTunes.
- The new Macbook Airs are just plain sick.
- China - Apple is rumored to be partnering with China Mobile, the world's largest mobile carrier, offering the iPhone 5 to their over 600mm customers
With all these bullish signs going Apple's way and looking at the stock's fundamentals, it is clear that Apple is still dirt cheap.
Needless to say, I am buying. If the institutions / big boys want it badly, then I want it badly too. I plan on buying and holding while also trading the swings. In fact, just yesterday I picked up some Jan '12 option calls.
To the folks that say, "oh I don't have a lot of money to invest and you need a lot of money to buy Apple for it to be worth your while", I say that's simply not true. It doesn't matter about the share price, just the percentage gain. You could buy one share at $400 and if it goes up to $500 you have still made 25% on your dollars in. And honestly I don't see a surer thing in the market.
Also: Why I'm Buying LinkedIn
