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Wednesday, December 5, 2012

AAPL the cheapest, again.

In one day, AAPL has regained the title of the cheapest large-cap tech stock. (I highlighted this fact on Nov 15th, and here I am highlighting it again 3weeks later. New info was provided.)

Here is a quick look:

PE - 14.42
Forward PE - 8.21
Cash (net debt) ~ $54B (~$6/share)

Microsoft heavily dependent on the declining PC, making its prospects suck. Ballmer is a crappy CEO, confusing the act of copying competitors (in search and mobile) and calling it 'innovative', thereby bastardizing the word.  Forward PE is also suspect due to the poor performance of Windows 8 and rapidly declining PC sales.

PE - 13.56
Forward PE - 11.34

They are positioned in the heart of the next phase of technology utilizing big data. The cash position is irrelevant with IBM because of their continuous re-purchases and dividend. They have a good balance of healthy financial engineering. I am a big fan of IBM, but have been waiting for their chart to firm up.

PE - 8.66
Forward PE - 10.18
Cash (net debt) ~ $3B

They are in a rapidly declining sector, and not moving fast enough in mobile. Hence the Forward PE, while already higher than Apple's, is very suspect.  The other day they issued $6B in new debt. IMO, effectively destroying their balance sheet. (I see an HPQ re-run.)

PE - 18.15
Forward PE - 13.42

The best supplier positioned to benefit from a sector growing from 1.2B units to 5B units globally.

PE - 21.55
Forward PE - 14.83

Google is knee-deep in mobile, social and web services that are growing strongly. IMO, they need to tweak their strategy on hardware because desktop may deteriorate faster than expected. The chart below best highlights my concern. This trend is taking place all over the world. (The chart is from Mary Meeker's year end Mobile review.)


PE - 12.20
Forward PE - 9.30

Cash: $121B, $127/share, (from last quarter) Remove the cash and the value of Apple's businesses (which are gaining market share) are in single digits, again. SINGLE f-n DIGITS!

Apple is knee-deep in mobile, and the evolution in computing. They are growing their computer business while disrupting the PC and their own computers. The iPhone continues to take global market share.  The iPhone US share has increased. The iPad Mini and iTunes 11 indicate the culture of high quality products outside the era of Steve Jobs.

The company best positioned to continue to take advantage of the mobile trend, is trading at the lowest comparable metrics.

Valuation is obviously a very subjective thing. I can produce a valuation to justify AAPL to trade between $600-700 pending on the method used to value the stock. (Although any of the generally accepted valuation methods can not produce a value for the stock with a 500 handle.) Regardless of the valuation method, the company best positioned for the future of mobile computing (and all that implies) is trading at the lowest comparable metrics to its peers.

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