Nine charts, with commentary, by friend-of-the-blog Jeff F:
Click to enlarge.
Jeff's observations:
- Institutional ownership of AAPL continues to lag. I believe this is factor explaining the higher P/E ratios of the others, excluding AMZN (institutions are likely wary that its valuation has gotten ahead of itself).
- Five Year EPS Growth rates need to be updated by Wall Street for Apple’s expected large share buyback on the order of $100- $150B. Tax rates will also boost these growth metrics, but that’s a relative issue, as all companies are impacted. Not incidentally, Apple is scheduled to report a 30% YOY increase in net income for the March 2018 quarter.
- Even assuming Wall Street growth rates are correct, it’s hard to see how they explain the P/E ratios assigned to AMZN, GOOG and MSFT, and the resulting share prices.
- Given Apple’s stated commitment of getting to cash neutral, Apple is going to have to purchase far more shares than what WS is currently anticipated to announce on May 1 ($100B). Although I did not chart it here, Apple’s cash is still king, reporting the highest amount of cash as a % of share price in the group.
My take: Apple still trades like a steel mill going out of business.
It appears Apple’s projected EPS growth rate does not fully reflect the company’s cash neutral plan and the company’s organic growth rates are discounted.
Re: Amazon’s earnings: Bezos knows what Wall Street wants from Amazon, which is delivering solid results. But every time Amazon starts to demonstrate it can earn its valuation, the bar moves even higher! At some point, there’s going to be a reconciliation between its share price and actual results and limits of its growth potential.
As an aside, Amazon’s announcement that it will be raising Prime may be a sign that it’s near saturation. Bezos’ strategy has always been to win market share with lower prices, so raising the price on this important item may be a canary in the coal mine.
The first chart shows Apple generating up to 3½ times the cash flow of others, yet it looks very ho-hum on a per-share basis. Does anybody really contemplate buying 100 shares of AAPL versus 100 shares AMZN, or are they more likely thinking of where to place $XX,000?
With its cash from repatriated profits and FCF of $50B+ a year, Apple will have approx. $300B over 3 years to repurchase shares. At today’s share price, that’s approximately 40% of its total outstanding shares!
But that’s another unappreciated fact of owning Apple…