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IPOs & Earnings

Apple – Valuation Doesn’t Matter – At Least for Now

October 6, 2025
Smartmachinenews

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A Giant Falls from Grace

Apple, once hailed as the greatest company in the history of the world, has rapidly fallen from its pedestal. Its stock price has plummeted, leaving investors wondering if this tech giant will ever regain its former glory. The reasons for this decline are numerous, but one thing is certain – Apple’s valuation doesn’t matter right now.

Apple Share Price 2012

Let’s take a look at Apple’s share price in 2012. Despite being down from its peak, the stock still has a significant value attached to it. However, when we compare this to other metrics, it becomes clear that Apple is cheap – spectacularly cheap.

  • Trailing P/E: 11.9
  • Trailing P/E ex Cash: 9.0
  • Forward P/E: 10.0
  • Forward P/E ex Cash: 7.6
  • Expected 2013 Sales Growth: 23%
  • Expected 2013 Earnings Growth: 19%

These numbers suggest that Apple’s valuation is indeed low, but it’s essential to consider the factors contributing to this decline.

Apple’s Valuation

When a company’s future looks bleak, its current valuation takes a hit. This phenomenon can be observed in various industries and companies. Seagate (STX) is an example of a firm that has seen its valuation plummet due to concerns about its future prospects. In Apple’s case, there are several factors at play beyond its low valuation.

Apple P/E Ratio Over the Last 5 Years

Let’s examine how Apple’s P/E ratio has changed over the last five years:

  • 2012: 11.9
  • 2011: 14.6
  • 2010: 18.3
  • 2009: 25.7
  • 2008: 33.4

It’s clear that Apple’s P/E ratio has fluctuated significantly over the years, influenced by various market and economic factors.

Apple’s Litany of Woes

So, what are some of the specific issues contributing to Apple’s decline? Here are a few:

  1. Everyone Selling Their Winners: At lower tax rates, investors are selling their winners to lock in gains.
  2. iPhone 5 Supply and Manufacturing Problems: The iPhone 5 has faced supply chain issues and manufacturing problems, affecting its availability.
  3. iPad mini Supply: There have been concerns about the iPad mini’s supply, with some reports suggesting it may be in short supply.
  4. iPad mini Price: Some analysts have questioned the iPad mini’s price point, arguing that it may be too high for consumers.
  5. Margins are Compressing: As Apple expands into new markets and products, its profit margins have been compressing due to increased competition.
  6. Steve Jobs is Dead: The passing of Steve Jobs has left a significant void at Apple, with some investors worrying about the company’s future without him.
  7. There is No Next Act for the Company: Some analysts believe that Apple’s success was heavily dependent on Steve Jobs’ vision and leadership, making it unlikely for the company to achieve similar levels of innovation in the future.
  8. Sentiment is Very Negative: The negative sentiment surrounding Apple has been fueled by various factors, including concerns about its future prospects and the departure of top executives.
  9. Top Level Executives Leaving/Kicked Out: The recent departures of senior executives have raised questions about Apple’s leadership and ability to execute on its strategic plans.

What is Apple’s Real Future?

While these issues are significant, it’s essential to consider them from a longer-term perspective:

  1. Everyone Selling Their Winners: This trend will end by December 31st.
  2. iPhone 5 Supply and Manufacturing Problems: These problems are already improving.
  3. iPad mini Supply: Demand for the iPad mini is strong, with its small size and price point making it appealing to consumers.
  4. Margins are Compressing: Apple’s margins will improve as manufacturing efficiencies kick in due to the launch of new products during the holiday season.
  5. Steve Jobs is Dead: While Steve Jobs’ departure has left a void at Apple, Jony Ive’s leadership and expertise provide a strong foundation for the company’s future success.
  6. There is No Next Act for the Company: This notion is unlikely to be true, given Apple’s significant R&D budget and aspirations in areas such as Apple TV.
  7. Sentiment is Very Negative: Sentiment will eventually shift as investors become more optimistic about Apple’s prospects.
  8. Top Level Executives Leaving/Kicked Out: The departure of Scott Forstall has been replaced by Jony Ive, who is well-suited to lead the company in both hardware and software development.
  9. The Company is Too Big: Apple’s growth may slow, but there is no law that says it needs to stop or reverse based on its size.

Apple Price Ratio Over the Last 5 Years

Let’s take a closer look at how Apple’s price ratio has changed over the last five years:

  • 2012: 11.9
  • 2011: 14.6
  • 2010: 18.3
  • 2009: 25.7
  • 2008: 33.4

It’s clear that Apple’s price ratio has fluctuated significantly over the years, influenced by various market and economic factors.

So What To Do

So what should investors do in light of these developments? For short-term investors, it may be wise to avoid the stock until these headwinds dissipate. As cheap as the stock is, it could get cheaper still. Coupled with current volatility, it’s a very risky time to enter.

If you own Apple shares and don’t want to sell for tax reasons, it might not be the right time to sell. However, holding on and ignoring short-term price action may be the best option.

For long-term investors, now would be an excellent time to consider buying AAPL. It’s essential to approach this with caution, starting to average in over a period of weeks. Long-term, I believe the stock is a screaming buy at these levels. There may even be better entry points available in the near future.