Stocks

Apple Goes From $500 to $600 in a Month


The proposed new Apple campus would have 2.8 million square feet of office space and sit on 175 acres in Cupertino, Calif.

Photograph by City of Cupertino via Bloomberg

The proposed new Apple campus would have 2.8 million square feet of office space and sit on 175 acres in Cupertino, Calif.

Shares of Apple touched $600 on Thursday morning—24 trading days since it first hit $500. So in less than a month, Apple has added about $92 billion to its market cap. That’s the equivalent of swallowing a company like Bank of America, without all the crappy mortgages, of course. (Bank of America has a market cap of about $95 billion.)

It’s getting hard to overstate how amazing this Apple run is. Apple as a trillion-dollar company no longer seems crazy, but simply a matter of time. As Barry Ritholtz points out this morning (care of BGR.com), Apple is just $14 billion away from being bigger than the entire U.S. retail sector.

As the stock continues to climb, analysts are falling over themselves to raise their targets for Apple shares. According to Barron’s, Piper Jaffray’s Gene Munster raised his from $670 to $718. On Wednesday, Morgan Stanley analyst Katy Huberty said that a share price of $960 was reasonable by 2013. At this rate, it could be reasonable by July.

Apple’s breakneck ride conjures thoughts of another tech giant whose stock went vertical in a hurry. During the first three months of 2000, in the halcyon days of the tech bubble, shares of Cisco shot from $50 to $80, giving the company a market cap of $552 billion by the end of March, roughly Apple’s market cap right now.

There are some obvious fundamental differences: At its peak, Cisco’s price-to-earnings ratio was a sky-high 192. Today, Apple trades at a humble 16.8 times its earnings for the previous 12 months. Given how fast its profits are growing, a lot of people think that multiple is too low.

Back in March 2000, Cisco’s price-to-sales ratio was 35.9, and it was earning 12¢ per share. These days, Apple trades at about 4.2 times sales and as of the end of 2011 was earning about $14 a share.

Cisco’s life as a $500 billion company was brief. By the end of May 2000, Cisco shares were back to $50. A year after its peak, Cisco’s market cap had shrunk more than 75 percent, to $130 billion. Apple’s fundamentals should give investors some comfort—no one knows how high it can go, but the numbers says it’s very unlikely to have a Cisco-like crash.

Philips_190
Philips is an associate editor for Bloomberg Businessweek in Washington. Follow him on Twitter @matthewaphilips.

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