Oh, No! Apple's at an All-Time High!

Apple (Nasdaq: AAPL  ) hit an all-time high today.

Again.

It didn't last. The stock traded as high as $644.05 a few minutes into the trading day before recoiling back to around $630 by noon.

This is the kind of move that will lead worrywarts to wonder whether Apple is correcting at best or peaking at worst.

There isn't much that can be said about a possible correction. No stock ever goes up in a straight line, and Apple shares have been on a meteoric rise in recent months. It's perfectly natural to see a small step back after so many giant steps forward. However, the suggestion that Apple is peaking is stupid.

If stupid is too strong a word, let's go with idiotic.

A stock price is just a number
It's not just about the valuation.

Apple's analyst-thumping earnings growth finds Wall Street pros in a never-ending race to adjust their profit targets higher. Apple is now trading for 14 times this year's projected earnings -- a lower multiple than we saw at this time last year. As profitability goes, so do analyst targets and capital appreciation.

The real stumper here is why so many people think Apple is peaking seemingly because it has never traded this high before.

With 941.6 million fully diluted shares outstanding, Apple was temporarily worth more than $600 billion this morning. The only other stateside-listed company that has crossed that milestone is Microsoft (Nasdaq: MSFT  ) . It happened a dozen years ago. It didn't end pretty.

However, Microsoft wasn't trading at an earnings multiple in the low teens. It was the dot-com bubble days, and Mr. Softy was unsustainably fetching more than 50 times its bottom-line production.

Then again, why bring valuation back into this? I have a meatier point to make.

Mille Bornes: the long way
Apple hit an all-time high today. So what? As I pointed out in a recent discussion board post, let's go over every time that Apple hit a $100 milestone.

  • April 2007 -- $100
  • December 2007 -- $200
  • October 2010 -- $300
  • July 2011 -- $400
  • February 2012 -- $500
  • March 2012 -- $600

Every single milestone was a unique all-time high. There were times in the past when Apple crossed $100, but it went on to declare 2-for-1 stock splits along the way. On a split-adjusted basis, Apple hit $100 for the first time five years ago.

Were there naysayers at every checkpoint? Absolutely. Were they wrong? You know the answer.

Is Apple going to fall below $600 -- or possibly even $500 -- before it crosses $700? Maybe. Nobody knows. The reason that some analysts are publicly throwing out price targets as high as $1,001 has more to do with where they see Apple in a year than the share price gyrations that are inevitable along the way.

If the iPhone and iPad continue to grow in popularity -- even if Macs and iPods die (which they won't) -- Apple's future is higher than where it is now.

Of course, things can go wrong along the way. Google (Nasdaq: GOOG  ) has been gaining global smartphone market share with its open-source Android platform. If it duplicates its smartphone success in tablets -- something that hasn't happened in a meaningful way outside of Amazon.com's (Nasdaq: AMZN  ) success with Kindle Fire -- Apple's growth may slow.

Let's also not write off Microsoft. It may be years away from revisiting its all-time valuation highs, but it's putting plenty of muscle behind its mobile operating system and upcoming Windows 8 upgrade. Mr. Softy may be a bigger player in smartphones and tablets in a year or two than cynics think.

Between a generous Google, an Amazon that's willing to take a hit on margins in the near term to grow its ecosystem, and Microsoft grasping at its best shot at renewed relevance, Apple's forehead is burning from all the crosshairs.

An optimist will argue that Apple will keep growing even under those scenarios because the "good enough" computing revolution that's making smarpthones and tablets this popular has room for plenty of growing winners. The pessimist will argue that Apple's about to fade, but where has listening to Apple bears gotten you thus far?

"It's different this time," I argued last month when Apple became just the sixth company to top $500 million in value. There was no shortage of cynical feedback to that remark. Apple bears scoffed at the idea that I would buck against the notion of history repeating itself.

Well -- using that same logic -- what can we say about Apple's chances of hitting $700 after clearing $100, $200, $300, $400, $500, and $600 before that?

Why is it different this time, bears?    

Beyond Apple
The next trillion-dollar revolution will be in mobile, but the best investing play isn't necessarily Apple. If you want to cash in on the upcoming trend, a new report will get you up to speed. Yes, it's as free as this article, but it won't last forever so check it out now.

The Motley Fool owns shares of Google, Apple, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, Amazon.com, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (7) | Recommend This Article (3)

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  • Report this Comment On April 10, 2012, at 4:17 PM, ConstableOdo wrote:

    Today, Apple stock fizzled out faster than a wet firecracker. Maybe it will be able to actually hold a $600 billion market cap in a couple of weeks if all goes well with the earnings announcement. As of now, that seems to be a crapshoot. Nobody seems to know if earnings will be good enough to raise the share price or send it plunging. Apple needs to make some acquisition of a business that makes earnings a little less unsure.

  • Report this Comment On April 10, 2012, at 6:05 PM, cdcummings12 wrote:

    @ConstableOdo: Apple needs to make some acquisition of a business that makes earnings a little less unsure.

    Really? Or, they could continue selling high-margin, in demand products by the millions. I'm not sure what, in their recent history, makes AAPL's eanings "unsure".

    Apple is in a different spot than MSFT 10 years ago. They continue to create not only new products, but new markets: iTunes, iPod, iPhone, iPad, and they could do it again with the iTV. We didn't know we needed these devices before their inception, but now we do!

    Also, their marketing is brilliant. Despite being being the largest company in the world (by market cap), they retain an "artistic underdog" perception in the market. It's still "cool" to own an Apple.

    MSFT never had this. For the most part, they're seen as a necessary evil by consumers (probably due to general dissatisfaction with Windows and some terrible upgrades over the past decade).

    AAPL is clicking on all cylanders right now. Sure, we'll see price fluctuation, but I'm not worried about an earnings shrink, or a radical shift in cultural perception anytime soon.

  • Report this Comment On April 10, 2012, at 7:13 PM, hakers1 wrote:

    I would have bought more shares of apple,if the price had been,or was under 100 dollars and I consider myself the average fool investor. I was just lucky to have enough $ to buy a few sh. about 1 year ago. SO I am hoping & wishing that the apple board , PRES. or whomever will make the shares split enough so that many fools can buy apple shares & share the amazing growth that this stock has had!-----HA-----

  • Report this Comment On April 10, 2012, at 7:43 PM, deasystems wrote:

    @ConstableOdo: I wouldn't exactly characterize a drop of 1.2 percent on a day when the S&P dropped 1.7 percent a "fizzle."

    As to your suggestion that, "Apple needs to make some acquisition of a business that makes earnings a little less unsure," I hardly know where to start. First, Apple's earnings have been anything BUT "unsure"! Please review the last 20 or so quarters...Take your time, I'll wait...

    Second, do you know of any business anywhere with more consistent and comparable growth?

    Third, Apple doesn't acquire businesses to please shareholders. It acquires them if and only if doing so will further its overarching goal of creating products and services that delight its customers. As you're a long term follower of Apple, I would think you'd know that...

  • Report this Comment On April 11, 2012, at 4:47 AM, Dive4life wrote:

    Split...Split...Split...Split...

  • Report this Comment On April 11, 2012, at 7:37 AM, JelleVe wrote:

    I hope they start pushing more and more of their customers in iCloud, once most of your digital life is stored on iCloud you have no choice but to continue to buy their products.

  • Report this Comment On April 12, 2012, at 1:54 AM, MatiasR wrote:

    You know, I've been long Apple for a couple of years now following two of your premium services and my own research but I sold most of my stake once it broke the 600 mark. But after reading your article, I sort of wish the stock to fall back to 300 or somewhere around that level. You calling stupid and idiotic anyone who suggests Apple might be peaking (such as Damodaran who I think knows a thing or two about investing and some of your colleagues at your HQ - I can give you the names) is, let's say, pretty arrogant. Just a thought.

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