The good news for Apple shareholders is the iPhone maker is once again flying high. The bad news: so is Apple’s valuation.
A furious rally has propelled Apple to all-time highs and a market capitalisation of almost $3.6 trillion (€3.3 trillion), overtaking Microsoft as the world’s most valuable company. However, the near 40 per cent rally since May means Apple’s price-sales ratio is now 9.5 – the highest valuation in its history.
Creative Planning strategist Charlie Bilello notes today’s reading is three times higher than what investors paid for Apple shares in early 2019. Between 2010 and 2020, Apple’s price/sales ratio basically never went below three or above five. That changed over the last four years as bullish investors bid up shares.
Things have really taken off lately, with Apple’s price-to-sales ratio swelling from 6.7 in late April to today’s unprecedented reading. Why? Well, Apple’s earnings report on May 2nd confirmed revenues had dipped but not as badly as feared, with investors also cheering dividend and share buy-backs announcements. It was a solid, if unspectacular, earnings report.
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However, Apple really shifted into gear when it entered the AI race on June 10th by announcing Apple Intelligence, a new AI feature, alongside a partnership with OpenAI. Since then, Apple has gained some $600 billion in market capitalisation, even though earnings estimates for 2024 and 2025 remain largely unchanged.
Apple is now an AI stock. That will eventually bring pressure to live up to its booming valuation.
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