Is Apple Stock Overvalued?

Tech

Is Apple Stock Overvalued?

Published

4 years ago

October 12, 2020

Harry Miller

Apple‘s stock price is up nearly 60% this year, and it has doubled in the last 12 months. At $2.16 trillion, the company’s market capitalization is the largest on the U.S. exchanges; and until a recent pullback, shares were repeatedly hitting all-time highs.

Those data points might scare some investors away. After all, the company was already huge. Now, its market cap is roughly $400 billion more than the next two largest companies, fellow tech giants Amazon and Microsoft, which are both around $1.7 trillion.

Is Apple’s big run a result of overly exuberant investors who have sent it soaring too high? Or can this tech behemoth keep getting bigger and continue to produce market-smashing returns?

Apple unveiled its Apple Watch Series 6 in September. Image source: Apple.

The valuation has gone up — a lot

Here’s a look at some of Apple’s key valuation metrics and how those compare to a year ago:

Date	P/E Ratio	P/S Ratio	P/FCF Ratio
October 2020	35.7	7.6	29.0
October 2019	19.2	4.1	17.9

Data source: YCharts. Data through market close Oct. 9. P/E = price-to-earnings; P/S = price-to-sales; P/FCF = price-to-free-cash-flow.

Those numbers illustrate that investors have gotten much more optimistic about Apple in the last year. A year ago, a dollar of sales was valued at $4.10 in the stock price. Today, that dollar is valued at $7.60. The same thing has happened with the company’s earnings and free cash flow. Put simply, Apple’s stock price has gone up much faster than its earnings, sales, and free cash flow.

How do these metrics compare to its largest tech company peers? Here’s a look.

Data source: YCharts. One-year change in valuation through the close of trading Oct. 9.

While Apple’s valuation has risen quickly, it remains lower than those of its peers. One reason is Amazon and Microsoft have higher growth rates. Amazon is forecast to grow adjusted earnings per share by 38% this year, and Microsoft just completed its fiscal year with 21% year-over-year growth. By comparison, Apple is expected to grow 9% in fiscal year 2020, which ended in September.

Reasons for investor optimism

In recent years, Apple’s iPhone sales growth stalled, and the device accounted for about two-thirds of the company’s total revenue. If iPhone sales weren’t growing, investors wondered, how would Apple grow?

That skepticism was reflected in the company’s relatively low valuation. In May 2016, when legendary investor Warren Buffett started scooping up Apple shares for Berkshire Hathaway, Apple’s P/E ratio was only about 11. It has since tripled, and a lot of that expansion has come in the last year. I believe there are two main reasons investors have changed their view of the company.

First, there’s optimism that iPhone sales could be in for a boost. On Oct. 13, Apple is expected to announce that its iPhones released this fall will support 5G connectivity, a technology that could significantly improve download speeds. That update could prompt many iPhone users — and there are about a billion of them — to upgrade to a new phone.

Second, Apple has been diversifying its revenue streams. In early 2017, CEO Tim Cook said he wanted the company to double its services revenue by 2020. That has happened, and in the quarter ended in June, the company set a record for services revenue ($13.2 billion). Apple has an installed user base of more than 1.5 billion devices, and if it can get those customers to increase their use of services like Apple Music and the App Store, that will fuel growth.

The company also has grown its wearables, home, and accessories segment, which includes products like AirPods, Apple Watch, and Beats. When Apple reports full-year earnings on Oct. 29, it will have more than doubled the segment’s revenue in just three years.

Those two segments are having a much more meaningful impact on revenue. In 2016, they accounted for just 16% of Apple’s revenues. Through the first nine months of fiscal year 2020, they produced $62 billion, accounting for 30% of total revenue. Even with that growth, the iPhone still accounts for more than half the company’s revenue.

Is Apple overvalued?

Valuation is in the eye of the beholder. That means the question of whether Apple is overvalued can only be answered by each investor. After all, the market is built on people taking opposite sides of trades: buyers and sellers.

For investors who emphasize traditional valuation metrics, Apple probably looks scary. It hasn’t had valuations this high in more than 10 years.

For investors who look at Apple as one of the most innovative companies of all time, the perspective could be different. The company’s innovation has helped build a massive and loyal customer base, which is why Forbes magazine ranks Apple as the world’s most valuable brand year after year.

With that track record of innovation and customer loyalty, I don’t think Apple is overvalued. Historically, there has never been a bad time to buy Apple stock, as long as you held those shares. As a $2.16 trillion company, Apple’s largest growth days are behind it, but I think it can continue to provide long-term investors with market-beating returns for years.

Source: – Motley Fool

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For Practitioners, by Practitioners: Solve Your Software Challenges at InfoQ & QCon Software Events – InfoQ.com

Published

1 hour ago

April 25, 2024

Harry Miller

Behind every InfoQ Dev Summit and QCon software development conference is a collective of distinguished senior software practitioners who carefully curate the topics based on the crucial trends and essential best practices you need to know about. These architects and leaders are charged with creating THE conference they would want to attend.

While some conferences issue calls for papers, InfoQ Dev Summit and QCon hand-select all the speakers. Domain experts individually select each talk for fit and merit. We search for the talks and find the speakers you want to learn from. These are not always the most famous people, but they are often the most compelling voices you’ll find in software.

Once the speakers are found, they undergo multiple interviews (with committee members, track hosts, and the conference chair) and a mandated rehearsal process before speaking at InfoQ Dev Summit and QCon. We offer training webinars, mentorship, and slide/code reviews with past speakers to enhance our speakers’ presentations, so they are sharp by the time they get to you. We take your time and conference investment as seriously as you do. We value the trust you place in us.

If you’re curious to see what types of talks you’ll find at InfoQ Dev Summit and QCon, take a look at a few recent talks:

How Netflix Really Uses Java: At QCon San Francisco 2023, Paul Bakker, Java Platform @Netflix, Java Champion, and Co-Author of “Java 9 Modularity”, explored the current Netflix architecture(s). He provided a deep dive into how and why the architecture evolved the way it did and related this to the evolution of the Netflix Java tech stack.
Banking on Thousands of Microservices: Suhail Patel, Staff Engineer @Monzo, shared at QCon London 2023 the lessons he and his team learned from building an online bank. He discussed technological choices, such as using Cassandra and Kubernetes in the early days, and explored how @Monzo has maintained its speed of execution through a focus on platform engineering and developer experience.
Why Technical Experience Matters: How to Build a Lifelong Career in Software Development: At QCon London 2023, Sven Reimers, System Engineer @Airbus Defence & Space, shared how you can be a lifelong software developer. He discussed how to have your deep technical expertise valued by the industry and the role you can play in mentoring the next generation.

We believe InfoQ Dev Summit and QCon conferences are special experiences. If you’ve never been before, you owe it to yourself to understand why our conferences are so popular among developers and architects. Come find out why we’ve earned the reputation as a conference of “practitioners talking to practitioners.” You won’t forget the experience.

The upcoming software development conferences for 2024:

P.S. Teams as small as 3 attendees working for the same company are eligible for a group discount. For more details, email info@qconferences.com and mention the conference and size of the group to receive your discount code.

P.S.S. Due to popular demand, we’re extending the early bird dates for InfoQ Dev Summit Boston and Munich by two weeks for InfoQ readers. Save $100 for InfoQ Dev Summit Boston with code LIMITEDOFFERIDSBOSTON24 and €75 for InfoQ Dev Summit Munich with promo code LIMITEDOFFERIDSMUNICH24 when registering. Valid until May 6.

About the Author

Artenisa Chatziou

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The Ultimate Recap of Sea Otter 2024 – Pinkbike.com

Published

11 hours ago

April 24, 2024

Harry Miller

Tech

Vittoria Releases New Peyote & Mezcal XC Race Tires
Maxxis Team Spec Aspen ST Tire
New DT Swiss 240 DEG Hubs
Kali Protectives’ New Full Face Helmets
Industry Nine’s SOLiX M Hubs & Wheelsets
Michelin’s Aggressive New Wild Enduro Tires
Praxis’ New Flat Pedals, Stem, & Carbon Bottle Cage
Transmission Cage Upgrades from Kogel, Ceramicspeed, and Cascade Components
Randoms Round 1 – Sea Otter 2024
Madrone Cycles’ SRAM Eagle Repair Kits & Prototype Derailleur
Vorsprung’s New Telum Coil Shock
EXT’s Vaia Inverted DH Fork & Updated Coil Shocks
Randoms Round 2: New Tools, Goggles, Grips, Racks, & More – Sea Otter 2024
What’s New in Women’s MTB Apparel at Sea Otter 2024
Even More Randoms – Sea Otter 2024
Randoms Round 3: Dario’s Treasures
What’s New for the Kids at Sea Otter 2024
Deity Releases New Stems, Grips, & Pedals
Dario’s Final Sea Otter Randoms
Brian’s Randoms from Sea Otter 2024

Videos

With roots dating back to 1991, the Sea Otter Classic is one of the biggest biking events and tradeshows each year and brings together all sides of the biking industry from athletes to brands, spectators and consumers. Taking place in April in the sunny hills of Monterey, California, that means this event really feels like the official start to the biking season in North America. Christina Chappetta covers why it’s much different to an indoor European biking tradeshow, a World Cup racing weekend or even Crankworx mountain bike festival, in that it encompasses nearly ALL of the biking disciplines, including road cycling, enduro, downhill, dual slalom, XC, trials riding and more.

In the past fortnight, we have seen large amount of new tech releases. However, Sea Otter 2024 represents some of the first opportunities for many riders to see these things in the flesh, as well as take a deeper dive into what the product aims to do.
Welcome to a video summary from Day 2 of the Sea Otter Classic.
There are so many giveaways, interesting new products and colourful characters at Sea Otter Classic that it’s hard to stand out from the crowd. Ben Cathro takes a lap of the venue to find his favourites.

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Apple iPad Air 2024: Insider Makes Hasty U-Turn On New Feature – Forbes

Published

12 hours ago

April 24, 2024

Harry Miller

Well, that was quick. On May 18, a respected industry insider predicted a new display technology for the iPad Air that’s expected in the coming days—Apple just announced its latest special event.

The new 12.9-inch iPad Air, the report claimed, would have the same miniLED backlighting currently found on the larger iPad Pro, using the leftover inventory from the current Pro as that model switches to OLED. That was exciting news.

But now, Ross Young, the analyst who made the claim, has changed his mind. The new prediction, shared with paid subscribers only, is that the miniLED technology won’t be coming to the iPad Air, in either size.

While it made sense that the inventory could be maximized in this way, it now “makes sense” that it won’t.

Young says that while he’d heard from supply chain sources that it would, he’d now had contact from “even more supply chain sources” that it won’t.

And the reason this change of heart now makes sense is that this miniLED technology is expensive, so it would be surprising if it made it to the iPad Air, which is more affordable than the Pro.

That’s not quite all the analyst shared. He also said that there are now reports of a new iPad coming later in the year. This is a 12.9-inch iPad, with miniLED backlighting and it could arrive between October and December this year.

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This is intriguing. What could it be? Assuming that the iPad Pro and iPad Air are released in May, it’s extremely unlikely either will be updated later in the year. And if the iPad Air isn’t pricey enough for miniLED to be included, what tablet could Apple be introducing that is the same size as the bigger Pro, with a pricey screen tech, which would sit between the Air and the Pro, it seems?

Young is highly reliable, but this seems slightly preposterous to me. The only other iPad in the range due a refresh is the regular iPad (at 12.9-inches, the iPad mini is clearly out of the picture) and that doesn’t seem likely either.

It seems to me that any regular iPad will almost certainly have the same screen size as now, 10.9 inches. The regular iPad only grew to this size screen in the current generation, and Apple almost never changes designs after one iteration.

Perhaps things will become clearer as the year goes on.

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