Reuters
(Updates to reflect Apple's market capitalization surpassing Exxon's)
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Robert Cyran
NEW YORK, Aug 9 (Reuters Breakingviews) - Could Apple be worth $1 trillion? It's conceivable. The $342 billion iPhone and iPad maker became -- if only briefly -- the most valuable company in the United States when it surpassed Exxon Mobil on Aug. 9. Yet its sales have been surging 80 percent a year, and profit faster. And Apple trades roughly in line with the growing U.S. market -- and at less than half the price-to-earnings multiple it fetched in 2006, when revenue growth was much slower.
((Price-Earnings Ratio - P/E Ratio
What Does It Mean?
What Does Price-Earnings Ratio - P/E Ratio Mean?
A valuation ratio of a company's current share price compared to its per-share earnings.
Calculated as:
Market Value per Share
Earnings per Share (EPS)
For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).
EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
Also sometimes known as "price multiple" or "earnings multiple". ))
Apple now trades at about 11 times estimated earnings for the fiscal year ending September 2012. The S&P 500 index is valued at about 10 times next year's earnings. But Apple's sales growth is not far off 10 times faster than that of the average company. The gadget producer also sits on $76 billion of cash and investments.
To get at this dissonance(Lack of agreement, consistency, or harmony; conflict: ")another way, consider Apple's PEG ratio. This hints at the price of growth by dividing a company's PE ratio by its projected percentage earnings growth. A smaller figure suggests a company is cheaper. Apple's is 0.2. That's low compared to growth darlings. Burrito purveyor Chipotle Mexican Grill, for instance, comes in at 2.1, and Salesforce.com at 13.2. Pandora and LinkedIn aren't even expected to make money.
Alternatively, put Apple on the same PE multiple it traded on in 2006, and it would be worth almost $900 billion. A premium for today's faster growth could get it to $1 trillion. Apple can't be so cheap just because Steve Jobs is in precarious health.
True, Apple already sells more per quarter than it did in all of fiscal 2007, and it takes more and more success to move the needle. Growth could easily slow. Yet the smartphone and tablet markets are young, the company's customers show remarkable fidelity, and areas such as television are ripe for new gadgets. Moreover, Apple's return on equity is almost twice what it was in 2006, suggesting it has pricing power.
Maybe investors simply can't fathom so large a company. A $1 trillion Apple would mean adding all of Microsoft, Google, Intel and Amazon -- and more -- to the firm's current market capitalization. Perhaps Apple is correctly priced, the market too expensive, and growth stocks grotesquely so.(Characterized by ludicrous or incongruous distortion, as of appearance or manner.
Outlandish or bizarre, as in character or appearance. ) But something doesn't add up. In relative terms, Apple should be worth far more.
CONTEXT NEWS
-- Apple's market capitalization was $341.5 billion in midday trading on Aug. 9. Exxon Mobil had a value of $341.4 billion.
-- In the last quarter, the firm's sales grew 82 percent and earnings increased 125 percent from the same period a year ago.
((robert.cyran@thomsonreuters.com))
(Editing by Richard Beales and Martin Langfield)
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Apple's iPhone loses China market share
Fri, Feb 17 02:24 AM EST
By Lee Chyen Yee and Huang Yuntao
HONG KONG/BEIJING (Reuters) - Apple Inc's share of China's booming smartphone market slipped for a second straight quarter in October-December, as it lost ground to cheaper local brands and as some shoppers held off until after the iPhone 4S launch last month.
China, the world's largest mobile phone market, has not been easy for Apple, which is grappling with a lawsuit from a local firm over the iPad name and issues at its suppliers' factories over wages and working conditions.
With the number of mobile subscribers set to top 1 billion in China this year, there is cut-throat competition among South Korea's Samsung Electronics Co Ltd, Nokia, Apple and local firms Huawei Technologies Co Ltd and ZTE Corp.
While Apple regained its top spot as the world's largest smartphone vendor in the fourth quarter and for last year as a whole, it slipped to 5th place in China, overtaken by ZTE. Apple's China smartphone market share slid to 7.5 percent from 10.4 percent in July-September.
In the last quarter, Samsung knocked Nokia off the top slot, taking 24.3 percent of the market, more than three times Apple's share, data from research firm Gartner showed. Nokia's market share more than halved last year, from above 40 percent in the first quarter to below one fifth by the fourth quarter.
"Chinese handset makers have been actively promoting their smartphones with China's three telecoms operators, so we saw ZTE and Huawei gain significant market share," said Taipei-based Gartner analyst CK Lu.
Gartner said this week it expected Apple's iPhone market share to slip for a couple of quarters as the novelty of its latest 4S model wears off.
In the first quarter of last year, ZTE had a market share of just 3 percent, but ended 2011 ranked 4th with more than 11 percent market share.
Chinese firms are gradually shifting up towards the higher end of the market, unveiling more feature-packed smartphones.
"If you want to sell handsets to the mass market, a simple rule of thumb in China is that the handset price has to be close to 70 percent of the monthly salary," said Jayesh Easwaramony, an analyst with Frost & Sullivan in Singapore.
"Today, an iPhone is more than two months salary."
This, said Easwaramony, gives the likes of Huawei and ZTE the opportunity to cater to a mass market that is captivated by the iPhone, but doesn't have the purchasing power for it.
VALUE FOR MONEY
"The quality of Huawei's phones is quite high and it's good value for money compared to the iPhone," said Dale Dai, a 28-year-old sales executive from Beijing.
Dai, who uses his Huawei phone to write weibo, or Chinese microblogs, surf the Internet and make calls, recently bought a new Honor smartphone for 1,800 yuan ($290), almost a third of the price of a new iPhone 4S at 4,988 yuan.
But given the sheer size of the Chinese market, just targeting the highest end users should be enough for Apple, though it's not always been a smooth ride.
Last month, shoppers in Beijing threw eggs at the Apple store and fought with police when they were told the iPhone 4S would not be on sale as scheduled.
In Shenzhen, some genuine iPhones and iPads are smuggled in from Hong Kong, while sellers also take advantage of Apple's popularity by packaging fake iPhones in iPhone 5 boxes - even before the 4S was launched.
In Hong Kong, Apple resorted to an online lottery reservation system for the 4S model after crowd control issues disrupted initial sales.
Analysts expect Apple to stem its slide in market share in China by signing up another carrier.
China Unicom, the country's No.2 telecoms operator, is currently the only carrier to officially carry the iPhone. It has not officially given its iPhone sales, but analysts estimate it has sold around 3 million iPhones since signing a contract with Apple in 2009.
China Telecom Corp Ltd, the third and smallest operator, is expected to be next to clinch a similar deal with Apple later this year, and analysts predict it would sell about 1.4 million iPhones this year if it can reach a deal with Apple by May, rising to 2-4 million new iPhone users in 2013.
($1 = 6.3016 Chinese yuan)
(Reporting by Lee Chyen Yee in HONG KONG and Huang Yuntao in BEIJING; Editing by Ian Geoghegan)
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