Could this be Apple’s reason for its cash hoard?

Is Android responsible for Apple’s deep market discount?
[Via asymco]

At last night’s closing price Apple was trading at a P/E of 16.3. Excluding cash that ratio was at 13. On a conservative forward basis (my estimates) the stock is priced at less than 10 times next twelve months’ earnings.

These figures show a remarkable pessimism that has persisted around Apple for years. It was slightly, but not much, worse during the great recession. It persisted whether the company was growing at 30% of, as now, 95%.

There are many hypotheses about why Apple’s earnings and growth are considered worthless. They come and go with the whims of the age: recession, elitist, luxury branding, health issues, macro “headwinds”, earthquakes, phantom competition.

Lately it’s become fashionable to blame Android. That’s a curious thing to me, because Android has been discussed at length here and it has been shown to be, for the time being, benign. Apple has not “lost sales” to Android as it has been selling all it can produce. In some ways it’s been a boon as a co-belligerent against non-consumption.

The argument that the discount is in effect because of the future of Android has one first strike against it: the fact that the market does not often discount the distant future. Capital markets are notoriously incompetent in spotting disruptions and often reward those who are failing right up until the bitter end.

But let’s take the “Android hypothesis” (i.e. that Android is causal to Apple’s share price) seriously and analyze it. How could the impact be measured?


After reading the entire post, the logical thing would be for Apple to buy Goggle. Fundamentals would indicate that the $170 billion purchase would generate $300 billion in value for Apple. SOunds like a good deal.

Apple has said it is holding onto the money in order to make strategic purchases. Could this be the one?

(Of course, such a purchase would probably not be allowed due to regulatory issues but it is a nice rebuttal to those on Wall Street that say Apple is hampered by Android.)