Apple recorded the best revenue quarter in history. With $137 billion in cash, Apple will be trading with about a $300 billion market tomorrow after the drop. With $180 billion or so in revenues this year, that puts the prices to sales ratio on Apple around 1.5%. As they generate another $50 billion or so in cash this year, that puts them around $190 billion in cash by the end of the year.
I don't think a valuation of 1 times 2013 cash and 1 times sales is much to be nervous about for very long.
The only thing really bothering Apple is the higher cost of sales wiped out revenue growth, almost dollar for dollar this quarter. Taking 38% GM as a long term assumption for Apple, that leaves them with about $10.75 in EPS next quarter. I expect some of the higher end estimates will have to move closer to $10 or $11 for next quarter, but I think that's a very sustainable business model for Apple going forward which probably leaves them with $46 in earnings for this year, which leaves Apple with a PE of 10 for this year at $460.
If Apple is guilty of anything, they were too aggressive this quarter with new products. But, I think they had to get very aggressive to stay ahead of the competition. At the end of the quarter, iPhone prices were very stable, iPad prices were down 17%, MAC prices were up and even the iPod prices were up.
I really can't get too stirred up about Apple at 10 PE, when they are making 5% of their market cap in cash every quarter. That's a helluva bargain, if you ask me. |
