04.01.2010
The Big Apple?
April 1st, 2010: No, this is not an April Fools article, it is something that has been an increasing concern of mine, and Apple stock investors should especially pay close attention.
[wikichart align=”right” ticker=”NASDAQ:AAPL” showannotations=”true” livequote=”true” startdate=”06-04-2010″ enddate=”06-10-2010″ width=”300″ height=”245″]
The Amazing Steve Jobs has done a phenomenal job since his return to Apple (AAPL). I remember Newsweek Magazine had a front cover story about Apple back in 2001 and called it, “The Fall of an Icon.”
Around that period Apple stock was about $11.00 before it split again on 02-28-2005. Split adjusted, that would amount to $5.50. So if you owned say 100 shares of Apple stock back at that time in 2001 at say $11.00 and held on to it until at least the last 2-1 spit date, you would have 200 shares at a cost basis of $5.50.
Apple just hit an all time high at 238.73, and is about to release a new product called the iPAD.
I am not here to do a product review or critic of this technology, my concern is from Apple’s stock valuation.
As of 03.31.2010, Apple is the 3rd largest company in the world by way of its market capitalization (market cap for short).
What this means is that if you take a stock price and multiple it by the number of outstanding shares (all public information) you have a total market cap, the current stock value of the company.
Here is a list of the largest companies in America by market cap.
Note: links to #1-4 below are in real time, so they will change as the stock prices changes.
#1 Exxon Mobil $328 Billion
#2 Microsoft $251 Billion
#3 Apple $214 Billion
#4 Walmart $210 Billion
Yes, as of the date of the post and over the last few days o so, Apple is bigger than Walmart. Should it be? Let’s compare the companies:
Apple Current PE 23
Walmart Current PE 14.94Apple profit margin 20.04%
Walmart profit margin 3.51%Apple annual sales revenue 46.71 Billion
Walmart annual sales revenue 408.21 Billion—Data Source: As of 04.01.2010, Yahoo Finance
Apple is clearing growing at a faster rate than Walmart, however the number that concerns me the most is that for ever $1.00 in Apple sales, Walmart has over $8.5 in sales. Granted Apple does have better profit margins than Walmart, and it should.
But should Apple be trading at these levels? A lot of excitement has been factors into Apple’s stock, that it can do no wrong. Any disappointment in sales will surely put a lot of pressure on Apple stock. And if the stock beings selling, off for 2-3 days straight, we could see all the small day traders or worse institutional sellers exit which could play momentum on the near term downside of the stock.
It would not surprise me if Apple develops several more hot products this year, and they almost have to in order to keep the stock up. We could see an ipad phone, ipad TV, ipad with flash, multitasking capability, or some other improvement to the first ipad coming out on April 3, 2010.
Longer term, as long as Apple continues to exceed expectations and has massive sales and massive net earnings to back up this growth, sure the stock should go higher. But in the short run with such a huge market cap, this is a bit concerning.
__________________________________________________________________________
Financial Disclosure:
In 2010, Author and or author’s client(s) are currently holding put options on Apple stock; have no potions in any other stock mentioned in this article.
Image copyright by respective owner. Copyright © 2010 Net Advisor™ All Rights Reserved.
Revised Copyright 2018. NetAdvisor.org®
NetAdvisor.org® is a non-profit organization providing public education and analysis primarily on the U.S. financial markets, personal finance and analysis with a transparent look into U.S. public policy. We also perform and report on financial investigations to help protect the public interest.
__________________________________________________________________________
