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Summary:

[qi:053] Remember when Apple’s (AAPL) stock topped the $100 mark, powered by another stellar earnings report? It was only six months ago. Judging from the rapturous reaction in the aftermarket today to Apple’s most recent earnings report, the stock is close to racing past the $200 […]

[qi:053] Remember when Apple’s (AAPL) stock topped the $100 mark, powered by another stellar earnings report? It was only six months ago. Judging from the rapturous reaction in the aftermarket today to Apple’s most recent earnings report, the stock is close to racing past the $200 mark.

Apple closed active trading Monday at $174.36. Following release of its fiscal fourth-quarter results, it shot up as high as $187.76. After market trading can be volatile, but it can often, if not always, be a good gauge of how the stock will fare in official trading the next day. It’s a pretty safe bet Apple shareholders will have a pretty good day Tuesday.

Apple has turned into one of those superstar stocks that seem incapable of disappointing investors. Just add money and watch your returns grow. The last big superstar stock in the tech firmament was Google (GOOG). But Apple seems to be in a higher class of supernova than even Google.

Ever since Google’s first day of trading back in the summer of 2004, Apple’s stock has outperformed Google so that, as of the close of trade Monday, an investor who bought Apple in the stock market on Aug. 19, 2004 would have made twice as much as an investor who invested the same money in Google shares.


applgoog.png

A lot of people have been talking about how Google’s shares have started to rally again after trading in range of $400 a share and $500 a share for months. In the last two months, Google’s stock has risen 27% to an all-time high of $658.49. In that same period Apple has risen 33%. Remember, that’s after Google’s post-earnings rise and before Apple’s.

applgoog2mo.png

So when will Apple see a slowdown the way Google’s did earlier this year? It depends. There really isn’t a lot in Apple’s business operations to suggest a dramatic slowdown in its business. As the earnings call showed, iPods and iPhones are spurring Mac sales, which are likely to spur more upgrades, whether to Leopard or to future generations of iPods and iPhones, and so on.

I think any danger to Apple’s stock is more likely to come from investors themselves. Once a stock is labeled a sure bet to rise, the speculators come running. The top graph above shows Apple’s P/E ratio creeping higher in recent months. Speculation could drive Apple’s price much higher in the near term but add downward volatility longer term. A stock split would only add to speculative volatility.

On the other hand, there is the value of historical perspective can provide. Apple has had Microsoft on the run in key areas. So has Google. But if you compare both those stocks to Microsoft since the 1980s, you get the sense that both of them have a long way to run.

msft vs appl and goog

Now that’s a lot of catching up to do.

  1. Maybe the increase in stock price is directly proportional to “innovation” ?

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  2. That’s a great analysis, especially for those interested in the long term prospects of Apple as opposed to getting caught up in only its current results. Readers may also be interested in checking out our article from NewsVisual: http://www.newsvisual.com/newsvisual/2007/10/could-apple-pul.html
    Some further insight may also be gained from understanding the relevance of the connections of its board of directors and executives. Apple is pretty well connected to companies like Google and Disney, through board memberships. The company will likely take advantage of anything it can, especially if it wants to reach for Microsoft status.

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  3. Well, One thing is that apple has more tangible products than google. A regular guy would think it to be more steady and promising.

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  4. great perspective and ensures that investors are still intrigue to tangible products!

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  5. GOOG is nice, since they have no competition in their core business right now and they are “printing money”. Going forward, if they start to lose sight of their mission– if they do really dumb things they won’t be able to do well– like a G-Phone– I may sell.

    What they should do: Buy Universal. GOOG and content could be a nice match.They’ve already got YouTube.

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  6. Cool now m=do the comparison with RIM, and report back.

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  7. Kevin Kelleher Tuesday, October 23, 2007

    tom, you’re right that RIMM has outperformed AAPL over the past year or so (a story in itself) but going back a bit further both AAPL and GOOG have done better than RIMM.

    http://bigcharts.marketwatch.com/charts/big.chart?symb=aapl&compidx=aaaaa%3A0&comp=rimm%2C+goog&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=609&style=320&freq=1&startdate=8%2F19%2F2004&enddate=10%2F23%2F2007&nosettings=1&rand=4902&mocktick=1

    i used the 8/19/2004 starting date (google’s ipo) as the starting point to be consistent with the first graph above.

    also, both AAPL and GOOG are significantly cheaper than RIMM on a historical and forward PE basis.

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  8. FMRT,

    Yup! Apple will cross 300 soon. This will surpass microsoft and google both. MSFT has Market cap of 288 billion, GOOG 210 and AAPL of 162. Apple will rule!!

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  9. Great post. Apple has grown over 28x in 4.5 years. In other words, $50K in Apple then, would be $1.43M today. Here’s another post that talks about this: http://fishtrain.com/2007/10/23/apples-stock-28x-in-45-years/

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  10. [...] Apple on the same day Google stock debuted in 2004 would have, as of the close of market yesterday, made 40 percent more than if the same money had been put into the search sovereign’s [...]

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  11. Hi,
    AAPL and GOOG stocks raised only because of Fed rate cut than their performance. I agree that they’ve come up with good results. I personally believe that Fed rate cut plays pivotal role in increase of prices of these scrips.

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  12. 3rdgengentlemen Tuesday, November 6, 2007

    I didn’t make a 25 million dollar bet that apple will reach 280 by Feb. 1st to lose.

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  13. [...] is up a whopping  138%. In comparison, Google, the other stock market darling is up a mere 54%. But you already knew that! Share/Send Sphere Print Previous [...]

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  14. You were actually making some sense until that MSFT chart compare argument at the end. Here’s an idea: do a DCF calculation for AAPL and figure out the growth required just to justify today’s price.

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