Comparing Apple’S PE ratio to Amazon and Netflix and Tesla, its not even close
While checking upon the FANG stocks the chart below for apple on a first look seems pretty overvalued, (Weekly chart pattern, straight up) but if you compare the PE ratio of apple to other stocks, you could give following statement Apple is currently under valued.
In fact the P/E ratio of 18.5 is a very common ration for well doing S&P500 stocks, it’s the price you pay for a stock with a stable price on the market, performing well. Yet in the past 5 years it seems that we have following problem to be solved. Either the market is ready to pay incredibly high PE ratios, since the rest of the market is not worth investing in or some stocks are simply overvalue, what am I talking about.
Im talking about Tesla, Amazon and Netflix, these 3 stocks have following PE ratios.
Amazon: 165
Tesla: 106 (has not even managed to generate an annual profit figure until today)
Netflix: 144
Alphabet: 51
Facebook with a PE ratio of 24 and Apple with a ratio of 18, are literarlly small joke figures compared to that.
I believe that Apple may actually see a ridiculous Stock price increase within the next few weeks, as investors will turn blindly into the FANG stock, calling it a safe investment, the herd psych will kick in, because if Amazon and Netflix are worth more than 100x than what the company actually earns per share, why shouldn’t Apple and Facebook have a similar PE ratio. Apple’s EPS (earning per share) currently stands at 11 USD per share and if the market decides its time to correct that PE ratio of apple, we may see a price of around 1320USD for one Apple share in the upcoming 2 years or so.
Dotcom bubble had company PE ratios of around 170-190, the problem is, are shares today signalling a bust cycle with such high share prices or are these norms, institutional traders simply value as fair. My problem currently is, that Netflix and Tesla are 2 companies which by no means have performed well enough over a time span of over 10 years to earn such a high PE ratio, in fact these 2 companies had disastrous earning periods in the past 5 years and hence their price is based on speculation, just like cryptocurrency has been and still is up to now (until it has real market application).
What do you think ? Is Apple with a of PE 18.5 undervalued ? Are Tesla with PE of 106 and Netflix with PE 144 overvalued?
The problem about predicting a recession, the data might point towards a bust cycle coming up, but it is always a black swan event that triggers it, and if you are early calling a bust cycle, it simply means, you are wrong – as a trader.