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The disconnect between Apple’s corporate performance and its stock value is something we’ve often commented on in the past. But rarely has the gap between the two been made more visually obvious than in a set of nine bar-charts published by Fortune, comparing Apple with Amazon and Google.

Judging from Merckel’s bar charts, what the market seems to be saying is that it believes Google and Amazon will keep growing indefinitely.

For Apple, it will believe it when it sees the next hit product.

The three ones above give the starkest illustration, while the complete set below give a fuller picture … 

It’s not that the market is necessarily wrong to be cautious about the future prospects of big tech companies. We’ve all seen meteoric rises followed by crashes, with Blackberry a recent example. There is a sense in which it’s perfectly reasonable to hold the view that Apple is only as good as its last product launch.

But what makes no sense at all is to ignore the current performances of different tech companies, or to expect one highly successful one to decline while simultaneously expecting the opposite of companies whose futures are no more assured.

ped-final-charts

Short-term price moves will always reflect short-term events, such as the dip when the China Mobile deal didn’t materialize on the expected date and the rise when it was announced a short time later. One might have thought the market would have a slightly more rational approach to valuing tech stocks in the medium to long term, however.
It remains to be seen whether Fortune‘s earlier prediction of institutional money moving back into AAPL over the medium term will turn into reality.

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20 Responses to “Wall Street vs AAPL in nine bar-charts”

  1. focher says:

    Being long on AAPL works fine because the nonsense works itself out. Doing short term buys and sells is more risky, because there’s no short term logic to AAPL (and actually, to pretty much any other stock too).

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    • I follow a guys blog who day trades Apple, he thinks he has it all figured out, he might trade it 20 times a day, and then he shows whether he made or lost money on the trade (he doesn’t divulge the number of shares traded). I think he’s nuts, the paperwork at tax time would be maddening and consider the fees for this exercise in self-churning.

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  2. Tallest Skil says:

    The inevitable Amazon collapse will be glorious.

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  3. Google and Amazon are both gatekeepers, Apple is not.

    Apple tries to be a gatekeeper with its App store and ITunes, but they have no leverage for those products, and their success will wane in those areas, leading them back to their origins as a hardware company.

    The trio, however, is like the three-headed dog guarding the gates of hell. Between the three you could not find an ounce of logic or human compassion, only arrogance and marketplace finesse. The blind lead the blind.

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  4. eldernorm says:

    This just goes to show you how out of touch wall street is these days. If you are a great company, great products, making a ton of money, your stock price will be in the toilet, unless you are a walmart, kmart, sears type store….. Then Wall Street knows how to understand you.

    Otherwise, promise the moon, make no money and hang on the edge of losing money and your stock price will soar.

    PS, Google has a good edge in the market, but recent law suits make it look like a dangerous bet, especially at such a high stock price.

    Just saying.

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  5. the last chart means nothing. You can’t compare stock prices. Unless you want to remove all Apple’s previous stock splits. It’s like saying MSFT is cheaper than AMZN because it’s stock is only 35 bucks.

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    • pecospeet says:

      Richard: In that vein, Earnings per Share is also a meaningless chart. But taken in conjunction with the other charts, it means something. Also, I’m not sure what previous stock splits have to do with making the comparison more meaningful.

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  6. I agree with Richard. Ditch the last chart. Comparison of stock prices means absolutely NOTHING.

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    • Len Williams says:

      You guys aren’t getting the point of the article, which is proven by the last graph. Wall Street doesn’t “get” APPL and it shows in the stock price. Apple is doing fantastically well, and has been for years, yet its stock price doesn’t track with their success. Amazon barely breaks even, and has since its inception, yet its stock price and P&E ratio are out the roof in comparison. Apple is more profitable and successful than Google by far, yet Google’s stock price is nearly double Apple’s. Hence, the last graph is the proof of the article’s first sentence, that there’s a disconnect between its performance and stock value.

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      • pecospeet says:

        Len: Comparing stock prices by themselves tells you nothing about how a company is doing or its value.

        Consider if Apple had split their stock 20 for 1 on January 1. My 100 shares (that were worth about $54,000 on December 31 assuming a stock price of $540) have now become 2,000 shares and the stock price has dropped to $27.00 per share. My 2,000 shares are still worth $540,000, so I lost nothing. But Apple’s share price would now be about 2.4% of Google’s stock price whereas on December 31 it was about 49%

        If stock price comparisons actually meant something by themselves, then in my hypothetical example, Apple would have lost significant value as a result of the stock split. In reality, they would have lost no value.

        While the stock price chart is meaningless on its own, it does provide value when read in conjunction with some of the other charts – for example, earnings per share. If you note on the bottom row of charts, there is a multiplication sign between the EPS and P/E chart with an equal sign between P/E and stock price. There is a relationship in there.

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      • pecospeet…

        better watch your math 54,000 = 540,000 ? Your logic is doing just about as well. Total price of a single share compared side by side isn’t the best measure, but there are many rates and ratios in the graphs that do.

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      • pecospeet says:

        Thanks Jim. Not sure if that means I need remedial arithmetic or remedial typing.

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  7. Shaun G says:

    It’s all about confidence. Apple is essentially a one product company as 50% of their revenue and profits derive from the iPhone. That is a very dangerous position to be in. That is why the market is not willing to move the share price up too much. In contrast both Google and Amazon have such a market dominance in their respective fields that there is confidence that they will be able to eventually turn that into revenue and profit growth. With Apple it’s all about the next big product launch. It’s nearly 4 years since they launched the iPad and we’ve seen nothing so far to suggest that they have another hit product in the pipeline that will have the same revenue/profit potential as the iPhone.

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  8. Jim Meuninck says:

    New investor of AAPL. I feel like this is a Republican vs. Democrat thing. People either love or hate Apple and it shades their view. How can two so called analysts be so far apart. There is a lot of short selling going on and many are long, either the longs or shorts are going to get burned. I have put my money on the long end. Apple has a loyal support base and every new customer they get typically stays. Unless cell phones and computers are going to be replaced Apple will keep making money and the world is its oyster and that’s a big place with a lot of customers…And there is of course the next big thing–it’s coming. Apple is going to 700 again.

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    • dojo8181 says:

      When Steve Jobs was at the helm, you knew for sure there was something really cool coming on the horizon. With Tim Cook, you aren’t really sure. This uncertainty has been weighing down on confidence in Apple. But I truly don’t think that is a major factor. Nevertheless, whatever the next new product is, it better be really useful and popular with consumers, otherwise I don’t think Tim will be around for another chance. I’ve held onto shares purchased in 2004 from empl stock options. I would have probably sold most of them if there wasn’t a dividend, but I can live on the dividend, and wait for another upswing to eventually sell some lots. I am appalled by the fact that google is at 1100+ and apple is less than half of that. I have always thought for the last 3-4 years that Apple should be the one trading at the prices google has commanded. Unbelievable!

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  9. Nothing against AAPL,but IMHO looking at their history tells me that they don’t do well in commodity markets. The PC became a commodity market and phones/tablets are headed that way rapidly. Unless AAPL has something truly innovative up their sleeves that creates a new market for them as a device manufacturer, I don’t see it playing out well in the longer term – bigger/smaller screens, new color options, and choice of plastic vs metal don’t count as innovative. It will be a redux of the PC market. There will always be a few in a niche that will pay more for the Apple experience, but the lion’s share of the worldwide market for PCs/tablets/phones, and the benefits thereof, will ultimately be controlled by someone else.

    Porsche makes great cars at a great profit and people buy them, but the auto industry is now driven largely by price and Porsche sells few cars relative to its rivals in the current market and wouldn’t be a first priority marque supported by the volume aftermarket or the first choice of average Joe consumer. Of course, that doesn’t mean Porsche is going away any time soon, but it will be a niche player.

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    • Ben Lovejoy says:

      Actually, Porsche has gone from a niche player to a semi-mainstream one. Apple did the same thing with Mac. Sure, nothing expensive will ever hit the same sales volumes as the pile-‘em-high makers, but Apple is chasing profit not turnover.

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      • I agree that Apple will always be profitable, just as they are with Mac hardware. For phones and tablets, though, I believe it will be profitability on a much smaller scale in the future, just like Macs. In the long run as we reach saturation, the network effects of large market share will ultimately work against Apple even if they do make great margin on every unit. IMO, of course.

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  10. jacobgann says:

    all three need to stop hording so much gd cash (just because the us gov is in repair mode and makes it easy right now, doesn’t make it right or smart). put that $#!) back in our economy! even if it’s only the USDM revenue. you’re (many others too) breaking our economy!

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