Much will have been written this weekend about the stock of Apple and its precipitous fall from grace — and from the top of the leader board of the world’s most valuable companies.
After relinquishing $60 billion dollars in market value on Thursday alone, Apple shares slipped another $10.62 again on Friday to bring the company’s market value to $413 billion. That’s roughly $5 billion behind oil giant Exxon Mobil, which regained its former status as the most valued company on the planet.
The high-profile decline of the once much-loved Apple has inevitably prompted many comparisons to other so-called fallen angels — companies like Cisco, Microsoft and General Electric — companies that, despite their own days in the sun, have never regained their former valuations. Some market watchers have even gone as far to say that Apple’s top status was a curse.
The trouble with that analysis is that most of the 11 companies that have claimed the most valuable spot in the S&P record books since 1926 have not done so in isolation.
Cisco and Microsoft hit high-water marks during the twin tech bubbles that bookmarked the millennium, while General Electric reigned supreme in 2005 as its finance unit cashed in on the Alan Greenspan Fed’s lending bubble.
When Cisco hit its all-time high in March 2000, it sported a market cap of $550 billion and a price-to-earnings ratio of 120.
At its September highs, Apple’s P/E was only 15, in line with the market average. Yes, Cisco’s market cap today is just one-fifth the level of 13 years ago, but it rode a tech bubble that Apple never did. In fact, Apple managed to quadruple its market value in the five years since October 2007, when the Dow hit its all-time high.
In other words, Apple made its astonishing move into the record books without bullish market winds at its back.
Of course, it is the comparison to Microsoft that gets the most ink and stirs the most ire among Apple fans. “Is Apple the New Microsoft?” blared the headline on Yahoo! Finance Friday afternoon, in type that could be seen all the way to 1 Infinite Loop. “Apple is too big to succeed,” one commentator remarked. Really?
Here again, the comparisons are specious. At its 1999 peak, Microsoft had a market value of $620 billion and a ridiculously high price-earnings ratio of 83. What’s more, in 2012 dollars Mr. Softie’s peak valuation was $851 billion, or about twice Apple’s value today.
But forget all the Wall Street number-crunching and consider this: Last year an estimated 20,000 crimes were committed in New York City involving stolen Apple devices. That’s how coveted Apple products are, and how easy to re-sell online.
Despite the recent slide, Apple is arguably the greatest consumer brand in the world, with huge markets still to conquer abroad.
Rather than comparing Apple to a General Electric or a Microsoft, a better barometer might be Nike, a behemoth of a brand that sells items customers are eager to flaunt and to upgrade long before they wear out. Compared with Nike, Apple again comes out on top, with half the P/E and an enviably fatter profit margin.
Yes, cheap stocks can get cheaper. Value traps are everywhere on Wall Street, as buyers of Hewlett-Packard can readily attest. But comparing Apple to recent stock darlings that shined for vastly different reasons doesn’t do Apple or the legacy of Steve Jobs justice.