If you're an Apple (NASDAQ:AAPL) investor, there's no doubt the past three months have been frustrating as the company's shares slid south. Yet, not long ago the company's shares briefly touched past $700 per share. What is needed to get Apple out of its rut and approaching all-time highs?
Senior technology analyst Eric Bleeker explains how P/E compression is at play. Despite being in the top 99th percentile in terms of five-year revenue growth rates, Apple is now among the bottom 20% of all major U.S.-traded stocks in terms of its P/E multiple. That's the result of investors increasingly being uneasy of being willing to pay for future growth.
As Eric explains, without any P/E expansion, even if Apple hits analyst earnings targets through 2014, it'll still be trading at $650 per share. To reach previous highs and soar beyond to $800, P/E expansion and a belief in Apple's future growth is a requirement. To see his thoughts on what will lead investors to pay a higher P/E for Apple, watch the video below.
Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Intel. Motley Fool newsletter services recommend Apple, Google, and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.