Apple’s been the two-ton behemoth of the stock market for so long that it is going to be surprising, in a way, to see that the company isn’t really pulling its weight anymore when it comes to its percentage of S&P 500 earnings. This sort of thing can be a bit silly, but Howard Silverblatt, the index guru over at S&P Dow Jones, points out that Apple right now is about 3.2 percent of the total market value of the S&P while at the same time accounting for an expected 2.8 percent of earnings in the S&P – the first time since 2008 that Apple hasn’t delivered a percentage of S&P earnings equivalent to its market value.
In the past few years, Apple has tended to carry much of the S&P on its back, such as in the fourth quarter of 2011 and first quarter of 2012, when it accounted for 6 percent and 5.2 percent of the index’s earnings – compared with accounting for about 4.4 percent of the market’s value at that time. In the last quarter of 2012 the stock was 6.3 percent of the market’s earnings and was less than 4 percent of its market value.
Of course you wouldn’t expect that to be the case now – the second and third quarters are the relative dead period when it comes to Apple, given people are generally waiting for the next round of Apple innovations at the end of the year, be it a new phone or what-have-you.
This time through won’t be all that different – with the only real issue being just how solid the growth is for the quarter and whether the stock begins one of its patented run-up-to-the-new-phone rallies that we’ve seen in past years that lasts through the end of the calendar year. Notably, Samsung’s Galaxy S5 came out and face-planted, and that’s either the result of just being a lousy product or competition from China, so it’ll be interesting to see whether upstarts out of China are starting to take share from everybody, or if the Samsung problems auger in general for better things for Apple, as tech editor Eddie Chan points out.
In the last five years, the period beginning July 1 has been the most fruitful for holders of Apple shares, with an average price gain of about 22.5 percent, compared with the relatively unexciting 11 percent gains seen in the first half of the last five years (for Apple, that is, for many companies, 11 percent is fantastic).
The stock has been basically flat since the beginning of this month, but it’s early in the “best six months” period for the iPad giant, so we’ll see where it goes from here. Starmine still puts the stock as undervalued, saying it should trade around $104 a share rather than the $94 where it stands now. The forward P/E ratio of about 13.7 is far short of its 10-year historic mean of about 20.7, and the stock’s price has traded around or below its book value for most of the last four years now. We’ll be looking a bit more as well at the idea that there are fund managers that are shunning shares in a way that they hadn’t in the past – not seeing the kind of value that they feel has been offered in other years, perhaps in part as the expected growth rate for the company slows with all of the additional competition.