Post-Jobs run on overpriced Apple shares fails to occur

The departure of Steve Jobs as boss of Apple was expected to result in a mass sell-off of the overpriced vendor's shares this morning, but the news has been overshadowed by larger events. Pre-market trading saw Apple shares pushed down more than 5 per cent. But early trading on Nasdaq saw the shares fall just less than 2 per …

[Anonymous Coward]

Overpriced?

I'm very curious to know where the author found Apple's share's overpriced, according to J.P. Morgan analyst Mark Moskowitz "Apple's stock valuation hasn't kept pace with the company's soaring revenue and earnings."

In addition:

"Apple's per-share earnings are expected to rise 81% in the fiscal year ending in September on a 66% jump in revenue, according to analysts surveyed by Thomson Reuters. In contrast, Apple shares had risen 55% over the past year, before Thursday.

As a result, Apple's stock is now priced at 13.5 times future earnings, down from 16.7 at the beginning of the year, according to FactSet Research."

http://online.wsj.com/article/SB10001424053111904875404576530163819400474.html

Still seems a good bargain to me.

[James Micallef]

Yes and no

Apple's P/E ratio is now a bit above 14.65 , if they lost 5% of market cap it means their P/E up to yesterday was around 15.4. On the US stock market the P/E ratio tends to be around 14, so yes, Apple was overpriced when taking into account real (past) earnings.

However if, as you quote, share price has risen by 55% and earnings are expected to rise 81% , that would make the stock underpriced. Of course that is only 'virtual' for now, since it's EXPECTED earnings not real ones.

[sleepy]

actually, you're effectively wrong; AAPL is underpriced

P/E is based on past twelve months earnings. In order for earnings to remain flat 12 months ahead, they'd have to _shrink_to match their rapid growth over the past year. If Apple simply stopped growing, then P/E would drop to about 10 in a year's time. But it's going to carry on growing. So without a share price rise, P/E will be down at 8 or so in a year's time.

Thus Apple is underpriced now, based on fundamentals. But when did the market consider fundamentals? Compare and contrast AMZN: P/E 86, slower growth, and smaller margins than AAPL.

[David Kelly 2]

Underpriced, I agree

Don't forget Apple's $76B in liquid reserves. If you back those out of today's P/E of 14.66 the earnings on resources Apple uses to be Apple is currently 11.4. Apple's cash reserves alone are worth $82/share.

[Mike Moyle]

re: Overpriced

TBH, I read it as "...run on 'overpriced' Apple shares...", written in full awareness of the knee-jerk "Apple SUXXXX!!!!!!" nature of some of the commentards.

They were just anticipating the flood of "Well *OBVIOUSLY* now that the Saint Jobs Reality Distortion Field has gone away, Apple stock is going to TANK... JUST LIKE I ALWAYS PREDICTED IT WOULD!!!! The stock's steady rise over the last dozen years was just a GLITCH and NOW it's going back into the GUTTERS WHERE IT BELONGS!!!!!" comments.

(Did I miss any of the standard frothing-points...? I'm still about a quart low on my coffee levels for today, so I'm not really awake, yet.)

Now, FLAME ON!

[Giles Jones]

Chill

Honestly, these are shares in a computer company. Your post reads like someone who is really uptight and close to having a stroke.

Go outside and breathe some air. There's more to life than computers.

[Anonymous Coward]

Not returning?

His previous departures have been temporary and the stock would take a wash because people knew that a lot of stuff would get put on hold for fear of being axed upon his return.

The minimal drop is probably an indicator that many believe that he will not be back.

[Ian Davies]

Wow

"many believe that he will not be back."

You worked that out all on your own?

The guy wasn't pushed out, he resigned. You think he would have done that of his own volition if he thought he could carry on?

[Sam Haine]

"overpriced vendor's shares"

I see what you did there.

It's a truism that the tech industry is littered with companies that made a great product or products but then lost their way. Palm, Nokia, RIM and Acorn all spring to mind and there are many, many more. One common feature is that there was a usually a long delay between the company losing its mojo and this being reflected in the company's financials.

Apple has a lot of momentum.

[Anonymous Coward]

The Reg trolling again

Once again, The Reg has abandoned its humour and insight to troll for Apple-related advertising. Oh, and I've just fallen for it.

[Tom 38]

Wonder if we'll now see dividends

Jobs really didn't like handing back any of his mountain of cash. I think he actually did have a small mountain of notes to roll around in, they needed the newer offices because the mountain got too big.

[Paul C]

It's none of the above

It's not dropping much because he's retaining the title of Chairman, and the company has been running fine with his already-reduced role. As long as he's in the picture at all, investors will have confidence. They're going to believe that he's setting the direction for the company and keeping upper management in line.

Once he steps down as Chairman - or passes away - attitudes may change more dramatically.

[Chad H.]

Indeed

Jobs is still the real power behind the throne; its just now the boring CEO-stuff that steve didn't want to do anyway gets foisted on the guy who was doing it for him.

[Mage]

But

Surely the revenue and profits are irrelevant if they never pay profit related dividends.

Apple shares are entirely thus a speculation vehicle as having them gives you no income.

[Mage]

Lost its way?

Acorns grow into great Arms.

[A. Coatsworth]

I've always found oddly amusing...

that the authorized Apple representative where I live is named "iCon"

Makes me smile every time I see their advertisement.

[J 3]

Indeed...

Quite unexpectedly rational of the markets not to panic re: Apple, in my (uninformed, unwanted, but gladly shared) opinion. After all, it's not like things really changed. In the more distant future though, it's quite a different question... you know, after the current workhorses have run their courses and the company has to come up with new toys... At least Jonathan Ives is still there, that gives them hope to carry on as per the past few years.