Apple Inc. (NASDAQ:AAPL)‘s announcements at the World Wide Developers Conference (WWDC) sparked interest. Phil Schiller tried to put critics to rest with his presentation of the Mac Pro on Monday. A promotional video played, Phil took the stage, looked at the image on the screens behind him and said, “Can’t innovate anymore, my ass.” But is Apple really being innovative?
Let’s look at Apple Inc. (NASDAQ:AAPL)’s Mac Pro first. Quite frankly, Apple is not innovative; Apple is dependent on other companies to create products for its use. Although it hasn’t been announced, the Mac Pro will likely use new products from Intel Corporation (NASDAQ:INTC).
Apple Inc. (NASDAQ:AAPL) will also use two Advanced Micro Devices, Inc. (NYSE:AMD) Firepro workstation graphics cards that can support three 4K displays by using internal graphics. Apple will likely receive credit for the innovation, despite other companies doing the work.
The graphics and processors aren’t really Apple’s to claim, but the design is. The design of the Mac Pro’s workstation is unlike anything else. The biggest thing for Apple in this case is that all of the expansion of this workstation is external.
Valuation
Regardless of whether or not a company is innovating new products for itself, it might offer a cheaper buy for investors. Apple beats out most companies in this area. Intel Corporation (NASDAQ:INTC)’s free cash flow (FCF) yield is a solid 8.1%, while Advanced Micro Devices, Inc. (NYSE:AMD) shows a negative twelve trailing months of FCF, and its FCF yield is -25%. Apple Inc. (NASDAQ:AAPL)’s is 10.8%.
Both Intel and Apple are far larger companies than AMD, as it only has a market cap of $2.8 billion. Intel’s market cap is is almost 44 times larger than AMD’s, but Apple trumps both of these companies with a market cap of almost $408 billion. Intel Corporation (NASDAQ:INTC)’s earnings yield is 8.2%, while Apple’s is 9.6%. Again, Apple Inc. (NASDAQ:AAPL) provides a cheaper valuation than either of its partners — Advanced Micro Devices, Inc. (NYSE:AMD)’s earnings yield is a dismal -25.1%.
AMD is much smaller, not as profitable, and excruciatingly expensive. It is definitely not the best deal for value or bargain investors, but it may offer better growth and performance than the others.
Performance
I don’t expect Apple Inc. (NASDAQ:AAPL)’s stock to move a lot, but I do expect shareholders to receive chunky dividends. I think Apple’s stock will remain between $400-$500 a share for a significant amount of time, but shareholders could receive an additional $100 billion by 2015. Apple is a cash cow. Now, with that said, let’s look at how these stocks have performed over time.
Year to date, AMD is the standout winner. Its stock has increased almost 67%, but has also experienced its worst year since 2008. Its stock fell in 2008, 2010, 2011, and 2012. 2009 was a huge year for the stock, as it increased an incredible 348%. Obviously the stock has given shareholders a very bumpy ride in the past few years.
Intel’s stock is up almost 20% year to date, but has seen far better performance over the past five years. In the past five years, the stock has increased by about 14%. From 2008-2012 Apple’s stock was up over 200%, but it has fallen 14.4% so far this year. The chart below shows how they compare over the past five years.
Apple Inc. (NASDAQ:AAPL) appears to present the best valuation and performance, despite using Intel and AMD’s products. AMD provides products to arguably the world’s most popular company; however, the company is very expensive, and has performed worse than Intel and Apple. Intel falls in the middle of the road. It has solid, but not great, valuations, and fair performance.
Bottom line
Market exposure is a major consideration for potential investors. These companies exemplify that perfectly. AMD is a small company, with far greater risk. Things are either going great or awful. Intel appears to present a good opportunity for investors without too much risk. Apple isn’t going anywhere, and should provide lots of cash for its shareholders in the next few years.
The article Apple’s Innovation Isn’t Real, but Does it Matter? originally appeared on Fool.com and is written by Tyler Wofford.
Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Intel. Tyler is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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