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Does the Market Really Love Microsoft More Than Apple?

In the following video, Motley Fool tech and telecom analyst Andrew Tonner takes a look at Microsoft's (NASDAQ: MSFT  ) valuation vs. Apple's (NASDAQ: AAPL  ) . In his comparison, he shows investors that Apple -- which has such strong growth prospects compared to Microsoft's headwinds both in the PC market and the mobile space -- should not be trading at a deep discount compared to Microsoft on a P/E basis. It just doesn't make sense. He highlights how overly bearish the market sentiment has gotten toward Apple lately and tells investors why this represents an incredible buying opportunity for the long run.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On March 18, 2013, at 11:47 PM, Seabiscuit5 wrote:

    Andrew - I think you might be forgetting that Apple has a net loss a couple of quarter's ago due to an unusual item. If you adjust the TTM eps for this supposed one-time loss I come up with a PE of a bit over 9 for MSFT.

    I like the outcome of your analysis, but it might not be a fair comparison.

  • Report this Comment On March 18, 2013, at 11:48 PM, Seabiscuit5 wrote:

    OPPS ! I meant to say MSFT had a net loss. Sorry about that.

  • Report this Comment On March 19, 2013, at 12:03 AM, jrogowsk wrote:

    Hello Andrew. Per the market, the comparison does not work. I own Apple stock, and use it's products. So I do do not feel biased when I state that the effort to compare Apple to Microsoft just does not work. This comparison involves one company, Apple, where half of the profits come from mobile phone, to another company, Microsoft, where the profit is more evenly distributed. The market looks ahead. Per the market Apple's mobile phone profit is in decline versus last year. With the next earnings announcements, Apple will be seen as shrinking as it was king of the hill last year. Microsoft is a different beast. MSFT is desperate to get into mobile computing business, but still has the legacy PC business and server tools that rake in the profit despite Balmer. Next quarter Microsoft will be seen as growing, as it was a failure last year. It is all perception. Microsoft's future can be debated, but the market has stated that it is stable, at least for now. This compares to Apple's half profit in mobile phones that the market has assessed will not grow, buy rather may decline. I own Apple stock, and write this on a iMac, but I hold on to the stock with hope as my investing thesis. Hope is not a good way to invest. Still, lets hope Tim Cook comes out tomorrow declaring they already bought back 10 billion in stock, will raise the dividend to an S&P average payout, and shall continue buying back stock as long as the PE is less then MSFT. One can hope.

  • Report this Comment On March 19, 2013, at 12:07 AM, StownCold wrote:

    Seabiscut5 beat me to my comment. Being a bit intellectually dishonest using the P/E of 15 for Microsoft given that its based on a loss of goodwill and ignoring the predicted earnings per share of 2.85 for 2013.

    Conditions aren't looking great for Microsoft with decreasing windows sales. I hope Apple keeps growing at a wild pace, but they're also losing computer sales; and is it clear that they're going to keep growing iphone and ipad shares. The law of big numbers is going to catch up.

    All that said, Apple is worth almost twice as much as Microsoft.

  • Report this Comment On March 19, 2013, at 12:37 AM, techy46 wrote:

    Who gives a crap what the market really loves?

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