Apple’s share price has been “topic A” in my world this week. Everyone wants to talk about it — and, everyone has an opinion. First and foremost, I do not own any shares of Apple (or any other tech stock). I keep my money under my mattress. Also, I am not a financial professional, nor am I going to suggest that anything you read here be used to make any kind of financial decision. You should consult your own financial professionals for advice on how to invest your money.
That said, Apple is trading just over $500 per share and its market cap is somewhere around $468 Billion. A little research will show that it has dangerously close to $100 Billion in cash and marketable securities and, hasn’t really had a bad quarter in the recent memory of man or beast. iDevice sales are off the charts and the company (for the moment) seems to be doing everything right. So, is Apple worth $500 per share?
If I were a financial analyst, I’d tell you that it’s probably cheap (trading at just over 14 times its earnings for the past four quarters). But that’s not the whole story. Talk to a true financial professional about accounting practices and dig deep into how Apple accounts for its sales – you may be surprised at what you learn.
Of course, Apple may be underpriced because the market lacks confidence in the future. Or, it could be that the Street thinks that Apple is about face super stiff competition from a CE industry that is “mad as hell” about being brutalized by nice folks in Cupertino.
All of this begs for the question, “How high can Apple share prices go?”
According to some of my friends, the sky is the limit. My cynical New York financial friends say, “What goes up, must come down.” Emails and txt messages from readers suggest that, “Apple can do no wrong.”
It’s the last point that gives me pause. Apple could easily screw up the iPad 3 or the iPhone 5. AppleTV (whatever it ends up being at launch) may not be awesome. There are, in fact, an infinite number of ways that Apple could fall from grace. It should also be noted that Samsung, LG and the Android camp are not exactly asleep at the wheel.
If I had to guess what forces will most impact Apple, I would have to seriously discount competition as a factor. Apple is extremely aware of what other manufacturers and software vendors are bringing to market, and it is unlikely to be caught by surprise.
If anything negatively impacts Apple, it will be an unforced error. This may be caused by any number of things: abject arrogance comes to mind. But, it is also possible that the patent/trademark lawsuit games that Apple likes to participate in may also get out of hand.
All in, if I was a betting man (and I’m not), and someone asked me straight up “What’s going to happen with Apple?” My best guess would be that it is an unstoppable force of nature, and that no amount of financial analysis or market research is likely to yield any usable intelligence — accounting practices notwithstanding, $500 per share seems like a fair price for a company that has literally changed the world.