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Apple Stock (Nasdaq: AAPL) at $600: Too Far Too Fast?

After Apple Inc. (Nasdaq: AAPL) touched $600, it set off speculation about whether the stock is truly worth $600 a share.

Some consider Apple's parabolic run-up in price as a warning sign of a bubble. In December Apple was still trading under $400.

Others look at the escalating sales growth of such Apple products as the iPhone and iPad and see justification for a $600 stock, a $700 stock, or even higher.

So we at Money Morning thought it would be worth comparing Apple's annual earnings numbers with the rise in its stock price since 2006, the year before the iPhone debuted.

Although it is just one of many factors affecting a stock's price, projected earnings ranks among the most important.

The chart shows Apple's stock price tracking fairly closely to the rise in earnings over the past six years.

Analysts do expect Apple to keep growing earnings at an impressive clip for the next two years. They project increases of 91% in fiscal year 2012 and another 54% in 2013.

But the diverging lines in the chart – representing the 45% spike in AAPL just since January 1 – suggest the stock price may have gotten ahead of itself.

Apple at $600 a share looks a lot more reasonable in December 2012 than it does in today.

Join the conversation. Click here to jump to comments…

  1. Walter | March 18, 2012

    You may be right that the stock got a little bit ahead of itself, but your numbers are still wrong: at a 2011 net income of 25.9 bn an increases of 91% in 2012 would amount to 49.5 bn and a further increase of 54% in 2013 would amount to 76.2 bn – not 45 bn and 50 bn, respectively, as your chart suggests…

  2. Andy | March 21, 2012

    Yea, not only are your numbers wrong, but if 91% and 54% earnings growth don't command a higher PE than 13 times next years earnings, one would think that AAPL is vastly undervalued…

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