After trading between $694.61 and $699.80 during the regular session, Apple’s stock touched the $700 mark in the extended hours trading. Apple is still trading well above its 200, 100, and 50-day moving averages, gaining roughly 78 percent for the last 12 months compared to an almost 30 percent gain for Google (GOOG), a 23 percent gain for the overall Nasdaq100 (QQQ), and a 22 percent decline for Hewlett-Packard (HPQ).
Apple’s stock has benefited by the successful launch of iPhone 5, which has created a great deal of buzz in the media and among consumers rushing to pre-order. According to an Associated Press Report, orders for the iPhone 5 exceeded 2 million in their first 24 hours, more than twice the comparable sales for the iPhone 4S over the same period.
IPhone 5’ successful launch is a significant development for Apple. First, it is expected to give a big boost in the company’s earnings, as iPhone sales count for the biggest chunk in the company’s profit. Second, it eases concerns over leadership transition after the loss of its legendary founder Steve Jobs, and the introduction of new products. Third, it proves that Apple continues to be the master of the buzz—something that Motorola Mobility and Nokia missed the previous week. What is next?
As we did write in a previous piece, Apple’s stock rapid ascend has fueled a wave of robust forecasts that call for Apple to reach $800, $900, even $1000 that hype investor expectations feeding into a speculative frenzy that parallels similar predictions for Cisco Systems (CSCO), and Hewlett-Packard(HPQ) back in the late 2000. We all know how that frenzy ended. But there is one significant difference this time around: Hype is supported and re-enforced by solid fundamentals.
Apple trades at a low PE for a technology company. Even after this big run up, Apple trades at a Forward PE (fye Sep 24, 2013 of 13.24). This means that the stock is still inexpensive compared to Google (trading at a forward PE of 14.37), and the Nasdaq100 (trading at a PE of 15). Also, Apple is firing on all cylinders, with its Mac and iPhones gaining in popularity among corporate users, and its competitive advantage strengthened with the recent victory against Samsung.