AAPL’s PE correlated to S&P500;‘s PE?

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    Posted: 12 September 2012 10:19 AM

    I came across an interesting hypothesis on ZH yesterday:

    each time AAPL’s P/E approaches the S&P 500’s P/E, it seems to cap AAPL’s hope-multiple…

    I’ve charted it myself, and it appears to hold some merit.  AAPL before Feb 2011 has had its PE exceed the S&P’s PE.  But it does appear that ever since Feb 2011, each time AAPL’s PE approaches the S&P 500’s PE, AAPL falls.  Now whether or not this relationship is correlated with each other or merely both symptoms of the macroeconomic picture, I’m not sure.  But it does provide another explanation for why AAPL fell in the last few days after hitting another ATH.  This hypothesis also predicts that AAPL won’t be able to sustain another ATH (it may hit before that, but not sustain) until after earnings in the third week of Oct (assuming they beat the year before quarter’s EPS), and that even if there is PE expansion, it’ll be capped by the S&P’s PE.

    What do you all think?  Does this hypothesis have merit?

    Source: http://www.zerohedge.com/news/market-losing-faith-aapls-leadership-again
    I got the S&P 500’s PE here: http://www.multpl.com/table?f=m

    [ Edited: 12 September 2012 10:22 AM by moltenfire ]


    My friends, love is better than anger. Hope is better than fear. Optimism is better than despair. So let us be loving, hopeful and optimistic. And we’ll change the world.
    —Jack Layton

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    Posted: 12 September 2012 10:36 AM #1

    Two aspects to consider before getting to the hypothesis.

    AAPL’s easy access cash of over $ 100 billion.  (115 ?) which as we all know shows that PE is not the only thing undervalued about AAPL.

    Large numbers in terms of PE and practical market limits.  Eventually, Apple will be seen as a mature company instead of a growth company even by AFB.  Pessimists in Wall Street already believe that.

    Given the substantial weight of AAPL market cap and the nature of Apple products, I believe Wall Street will undervalue AAPL for the foreseeable future.  (Never mind Amazon.)

  • Posted: 13 September 2012 10:39 AM #2

    I would probably add earnings releases to the chart as they are probably the reason for the sharp drops.  It would be interesting to see the number if the earnings for the next quarter were added in weighted based on time til earnings.  I bet you would get a much straighter line.