Rotten Apples make good Fertilizer w Cash FWD PE of Just 6.06x
Apple ended Q1 2013 with $137.112 billion in cash & investments (around $43 billion of which is held in the United States), and based on 947,217,000 diluted shares outstanding, the company holds $144.75 per share in cash & investments. Based on Apple's closing price of $450.50 on January 24, 32.13% of Apple's market capitalization is in cash. In our view, this is unwarranted. Apple's cash balance now accounts for almost a third of the company's market value, and if it were to be excluded, Apple's trailing P/E would fall to 6.93, and its forward multiple would fall to just 6.06x. Are Apple's days of easy growth behind it? Perhaps they are. But with a trailing multiple approaching single digits, and forward multiples already there, Apple's shares are priced at multiples that suggest the company will never grow again. While Apple's Q2 guidance suggests that growth will slow in the quarter, Apple's forecasts for both operating expenses and capital expenditures imply the company is preparing for growth in the remainder of 2013, and we think it is unwise to jump to conclusions about the second half of the year based on one quarter of guidance. Apple's multiples are hardly stretched, and with a dividend yield of 2.35%, Apple's shares are pricing in a bleak future, something we believe is unwarranted.