Apple Inc. (AAPL)’s Decline and the Opportunity it Provides

Apple Inc. (NASDAQ:AAPL)’s share price has recently taken a tumble. But with the kind of available cash that they have, entering into a whole new market seems likely, and with it the rebirth of their stock.

A Lot of Time on A Few Great Things

Apple’s latest commercial is less about advertising a product than it is advertising the company. It’s not a commercial for the latest iPhone, iPad, or Macbook Pro–it’s a commercial for Apple Inc. (NASDAQ:AAPL) as a whole. A company that “spends a lot of time on a few great things” (quote from commercial), and it’s so true. The commercial is almost a tearjerker. With soft piano background music going, it highlights the most joyful parts of life; looking at a child’s face light up, a couples’ love, and grandparents looking back on the incredible life they’ve had. If you haven’t had the chance to see it, I suggest you do:

http://www.youtube.com/watch?v=Zr1s_B0zqX0

Recently Apple’s share price has steadily gone downhill, from a high of around $700 to $400 today. This is not because the company is dying, It is because Apple Inc. (NASDAQ:AAPL) has done such amazing things that everyone expects it to continue to outperform in incredible ways. Profits have stopped their upward climb, and are expected to be about the same as they were last year. This is not something that should be taken lightly. It’s never a good sign when a company’s profit growth stalls. This is the company’s lowest rate of profit growth in decades.

Even though this is the case, I’d pay 10x earnings forever, even if they do stay flat. And if Apple hits the next big thing, which they’ve been known to do, I’ll be sitting pretty. With downside protection and upside exposure, what’s not to like? Profit margins have only slightly decreased, while still easily above 20%, compared to Microsoft Corporation (NASDAQ:MSFT)‘s profit margin of around 29%, up from 21% the year earlier.  So is it fair to count Apple Inc. (NASDAQ:AAPL) out of the race?

Competition is the Best Motivation

The P/E of Apple is 10.08, while Microsoft’s is 17.56. Microsoft Corporation (NASDAQ:MSFT) provides the competition in computers, and Google Inc (NASDAQ:GOOG) provides competition in operating systems, and if anything, this is a great thing. Apple Inc. (NASDAQ:AAPL) has always been ready to take on anyone, fighting for a chance ever since Steve Jobs and Steve Wozniak founded the company. If you’re wondering which of these investments to make, let’s look at their market caps, P/E’s, and historical share prices. Then we’ll look towards the future.

Microsoft Corporation (NASDAQ:MSFT)’s market cap is far smaller than Apple’s, at $284 billion compared to Apple Inc. (NASDAQ:AAPL)’s $395 billion, while Apple’s P/E is also lower, as previously mentioned. Google has a P/E of 26 and a market cap of $293 billion. With better price to earnings ratios and a larger market cap than both its competitors, Apple Inc. (NASDAQ:AAPL) is cheap.