October 2010
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Day October 18, 2010

Apple's P/E drops below 20 (again), ex-cash P/E at 16.44

Following earnings growth of 68%, after hours trading of AAPL at $300/share shows a P/E of 19.8. The company added over $5 billion in cash for a total of $51 billion or $52.9/share.

Excluding cash from the price of $300 leads to an enterprise value of $249 and a trailing twelve months earnings of $15.15. The ex-cash P/E is therefore 16.44.

P/E/trailing Growth is 0.29.

My guess is that this is keeping AAPL cheaper than the S&P 500 on both P/E and P/E/G.

Which size really matters? Market Share vs Profit Share

One of the most hotly debated subjects in the mobile phone business is the importance of market share. It’s also a topic of lore in the PC industry. Briefly the two arguments are:

  • Market share matters more because it drives network effects which ultimately drive competition out of the market, creating the opportunity for monopoly rents.
  • Profit share matters more because profit is the only fuel that can drive innovation. Any macro downturn or shift in strategy can cause a company to cease investing in unprofitable projects.

The old disruptor’s adage: “Be hungry for profits and patient for growth” is challenged by the equally disruptive: “Grow share with lower prices in exchange for new revenue sources.”

There are many rich anecdotes to support each strategy, but how about some data?