The Overheated Apple Stock - A Close Look
Apple shareholders are currently experiencing a rollercoaster ride with the tech giant's soaring stock performance. On one hand, the company's market capitalisation has hit a staggering $3.6 trillion, surpassing even Microsoft to become the most valuable company globally. However, this surge in Apple's value has also led to its price-sales ratio reaching a record high of 9.5, the highest in its history.
The Unprecedented Valuation
Investment expert Charlie Bilello highlights that the current price-sales ratio for Apple is three times higher than what it was in early 2019. Historically, between 2010 and 2020, Apple maintained a price/sales ratio range of three to five. Nevertheless, in the past four years, bullish market sentiments have driven this ratio to new heights.
The Recent Surge
In recent months, Apple's price-to-sales ratio has skyrocketed from 6.7 in late April to its current level. This exponential rise can be attributed to the positive reception of Apple's May 2nd earnings report, which showed better-than-expected revenue performance and included announcements of dividends and share buy-backs. Although the report was solid, it didn't have any groundbreaking revelations.
Apple's Leap Into AI
Apple significantly boosted its standing in the market on June 10th by venturing into the AI landscape with the introduction of Apple Intelligence, a new AI feature, and a collaboration with OpenAI. This move resulted in a remarkable $600 billion increase in Apple's market capitalisation. Despite this surge, future earnings estimates for 2024 and 2025 have remained relatively stable.
With this transformation, Apple has now become synonymous with AI in the stock market, which inevitably raises the stakes to justify its current valuation.
