Apple’s PE ratio cracks 40 on Reuters’ Apple car report

This is only the second time in a decade. The first was five months ago, when Apple shares nearly touched $138.

Cue the PE Ratio from YCharts:

My take: Are we in nosebleed territory yet?

See Reuters’ Exclusive: Apple targets car production by 2024 and eyes ‘next level’ battery technology – sources

13 Comments

  1. Gregg Thurman said:
    High ISM for the day seems to have peaked at 40.977. I’m having difficulty breathing, just a year ago it was 23.987 and we thought that was a dramatic improvement over previous ISMs.

    2
    December 22, 2020
  2. Michael Goldfeder said:
    As Gene Munster said in his subscription based zoom call on Saturday: (Paraphrasing) “Apple is a consumer staple just like Coca Cola and Clorox, so why shouldn’t they have a comparable PE? Coca Cola was flat with no earnings growth and still maintained a 25 PE. Since Apple is intertwined with our lives, it just blew my mind as to how Apple was still being viewed as a hardware company with a low multiple.”

    4
    December 22, 2020
  3. Robert Paul Leitao said:
    Apple’s multiple expansion has been driven largely by Services revenue growth and anticipated growth in Services revenue at roughly twice the gross margin of device revenue. We don’t know how long, on a market-wide basis, higher trailing earnings multiples will be sustained. There’s currently no real opportunity cost for investing in equities and it’s quite possible the market is already pricing in the positive impact of new stimulus and the future reopening of the economy as vaccine shipments begin. Profits of publicly traded enterprises will almost certainly rise YOY in 2021. In general, I expect trailing multiples to decline as 2021 profits are realized.

    2
    December 22, 2020
    • Bart Yee said:
      While Services growth at high relative margin has been the primary driver of multiple expansion, to me its also clear that Apple’s growth and iteration of new hardware lines have also created diversified revenue paths – Watch, Wearable & Hearables, expanded iPads, now M1 Mac pathway, potential AirTags, etc., all with Apple custom silicon powering them. Tie in the investments in Apple TV+ content which will pay off in the future (same model for project Titan, Maps, AR, etc.) and we can see the huge hardware AND software, services, et. al. ecosystem that awaits any Apple user.

      Growing the installed base from any entry point 8-9/10 times creates a long term sticky user who benefits from Apple’s thoughtfulness and mindfulness, in turn benefiting Apple and its shareholders.

      Imagine, doing good, and doing good doing it. What a business concept! 🙂

      0
      December 22, 2020
  4. Tommo_UK said:
    PE multiples aside, I’m still waiting for a note from Toni & Rod about “Apple’s manufacturers experiencing supply chain issues a threat to fulfilling the 30% increase in iPhone orders.”

    Toni always puts out a component shortage or channel stuffing, ora cut in Q2 orders note in time for Christmas but he must bet having a hard time finding negatives this year.

    Maybe he’s sulking because his iPhone 12 Pro Max isn’t due for delivery until January.

    0
    December 22, 2020
  5. Robert Paul Leitao said:
    Specific to Apple, I expect the company’s revenue and profits to benefit from the reversal of forex headwinds. In other words, the company is likely to benefit from the impact of a lower dollar. Questions to be answered include what will be the rate of increase in operating expenses (opex) in the post-pandemic period as well as how long the pandemic period demand for digital communication devices will continue. The good news for Apple is the 5G upgrade cycle is likely to last two to three years as consumers around the world upgrade for faster connection speeds. The M1-based Macs are also in the early stages of deployment. However, in my view, to sustain high earnings multiples, the rate of growth in Services revenue will be a huge factor.

    1
    December 22, 2020
  6. Gregg Thurman said:
    In other words, the company is likely to benefit from the impact of a lower dollar.

    Last week the dollar dipped below its relative value of 90 for the first time in 2 years. It’s high in that time frame was 104.

    I don’t see it going down from. To many factors out and about supporting the dollar there, although I wouldn’t mind if it dropped a bit more, say to 85. It’s been years (a decade?) since we last saw that level.

    0
    December 22, 2020
    • John Butt said:
      Winners and losers on exchange rates Gregg. My holding has ‘lost’ a large chunk of money due to the dollar dropping, because that makes my AAPL stock less valuable in NZD.

      0
      December 22, 2020
  7. Jerry Doyle said:
    Tesla’s P/E is 1224. I don’t see WS hyperventilating over that number. Besides, it’s all about what brother Gregg Thurman reminds us often: Again, this is why I prefer the term “Investor Sentiment Multiple (ISM) vs the more common “PE”.
    “…. WS has a strong propensity to label “PEs” as good or bad. They are neither, they are what Investors make them to be by the value the market places on a Company’s equity.” Brother Gregg Thurman. So true!

    If Apple has a P/E in the 40’s then “so what?” Amazon has a P/E of 93 and I don’t see anyone questioning that figure.

    Anyone know where I can put my deposit down on the iCar?

    0
    December 22, 2020
  8. Steven Philips said:
    Jerry, If they call the American version
    the iCarUS
    I think it will go down in flames. 🙂

    0
    December 22, 2020
    • Jerry Doyle said:
      @Stevens Philips: My good man, Apple never would do such a thing. Apple is the world’s company and the peoples of the world are Apple consumers. There is only one recognized, accepted and embraced world company and that is Apple. While Apple is a global company, it is indigenous to every country on the planet. It is as Michael Jackson sang: https://www.youtube.com/watch?v=s5Yw3D-a7Ro

      I’m thrilled! I’m happy. I escaped on a road trip to the Biltmore Estates where I have tickets for Christmas Eve and Christmas Day. I’m now in Birmingham, Alabama on my way to Asheville, NC. Had dinner this evening at Ruth Chris. I’m excited about the iCar. Can anyone tell me where I can put down my deposit?

      0
      December 22, 2020
      • Bart Yee said:
        “Missed it by “that” much!”

        0
        December 23, 2020

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