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