Growth Vs Value
This is the fundamental issue for shareholders; do they want Apple to be a value or growth stock. Nobody wants Apple to become like Microsoft Corporation (NASDAQ:MSFT) which has been at the lagging edge of tech innovation (except for its gaming system) and share price appreciation. But investors still appreciate the 2.30% yield that they can’t get from its closest rival, Google Inc (NASDAQ:GOOG). What’s a grandmother to do?
Apple is currently trading at a 10.62 P/E with a PEG of .52 but Apple had dropped some 30% from its September high of $705 seeing increasing competition from Samsung for its phones and Amazon and Google Inc (NASDAQ:GOOG) for its tablets. Google is trading at a 24.03 P/E and Microsoft Corporation (NASDAQ:MSFT) is at a 14.99 P/E and offers a 3.30% yield. Microsoft Corporation (NASDAQ:MSFT) has an 8.38% five year EPS growth rate, Google Inc (NASDAQ:GOOG) a 13.75%, and Apple the highest at 18.98%.
Apple is still a retail powerhouse but there have been defections from the Apple ecosystem as consumers have a plethora of options. The damage that a preferred stock would garner for Apple’s growth image has been debated in numerous media channels since Einhorn’s bombshell. Shareholders would be cheered if only laconic C-suite execs would up its spend on accretive and strategic acquisitions and R&D spending, currently at $3 billion, on the innovation pipeline and let them know.
Right now, compared to Microsoft Corporation (NASDAQ:MSFT) and Google Inc (NASDAQ:GOOG) Apple is a growth and value stock. It holds the Number One spot in the US smartphone market, 36.3% and growing according to numbers released by comScore on the same day as the Einhorn news. It still has the most apps, over 25 billion iTunes sold to date, still in the cloud, and it has its fingers in a lot of AAPL pies that are rarely advertised like a recent patent application for a solar iPhone as well as 20 patents granted in 2011 for various solar technology applications for Apple products.
The Cruelest Cut
Einhorn says he is in Apple for the long haul and added to his holdings since his last statement. Almost 2,000 institutions hold Apple not to mention all the retail investors so it all depends on what the majority of these institutions and retail investors really want. Most would probably be happy enough with a raise in the common yield as long as they knew the company could continue to innovate.
As far as Apple shareholders are concerned Google and Microsoft Corporation (NASDAQ:MSFT) can keep “scroogling” each other in their search and tablet competition. Apple still has impressive growth ahead if they want to spend a little more of the hoard, maybe working on a less expensive (I hesitate to use the word cheaper) iPhone for emerging markets or finally getting a handle on that Apple TV “thing” and a rumored Apple watch. Growth and innovation have been Apple’s hallmarks and that is what I think they should blow the cash on.
The article On The Einhorns Of A Dilemma originally appeared on Fool.com and is written by AnnaLisa Kraft.
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