I have never seen a company make so much money as Apple (AAPL). Nobody has because Apple must be the most profitable company ever. Don't forget they also make great products unlike the software stock who was the previous most profitable company, who had mediocre software (except excel), not mentioning any names. I don't think there was anything negative about Apple's quarter. Oh one thing, iPad units and asp was down. ASP rose on iPhone and Mac. Other than that, this company is striking on all cylinders. The best thing about Apple is you can still buy it for 10x forward earnings ex-cash.
Apple provided the following guidance for Q2:
If you plug these numbers into their income statement, the EPS comes out to $2.01 per share which also happens to be the consensus EPS estimate.
The S&P is trading at 16.7x forward eps. If you take Apple out, and several other cheap mega-cap tech stocks, the remaining market will be even more over-valued. Historical average multiple to forward earnings is 13.8x. The high multiple was not so bad when earnings were growing. S&P earnings grew 10.8% in 2013 and 7.9% in 2014. Now what are we getting? EPS growth of 2%. Take energy out and EPS growth jumps to 3% - 4%. Hardly a growth rate deserving 16.7x multiple.
Apple cannot keep this market up on its own. The only stocks that have reported great numbers so far this quarter are airline stocks, Apple and companies that do business with Apple. Everyone else seems to be struggling. Apple is a buy, but the market is a sell.
Michael Grove, CFA