Finance: Apple Inc., Term Paper Example

By the end of November 9^th 2009 the Apple Inc. price per share was 201.46, almost all investor sentiments about the tendencies of Apple activity on the market come to a Bullish agreement. In the last five years this enterprise, representing computer technologies and high-tech devices has been proving outstanding market performance. The Apple Inc. company market value has reached the amount of 183 billion dollars, making it theoretically capable to buy such competitors like HP and Dell together. Considering the PPS of Apple Inc. five years ago, shares only barely reached the price of $30, till today the PPS of AAPL has rocketed by approximately 645 per cent, providing a relatively high Price/Earning Ratio comparing with the competitors. The Price – Earnings Ratios among almost all IT companies have similar tendencies, among each other they do not distinctly differ. The P/E Ratios among companies who compete in the same market segment may only differ by the being higher or lower than of the competitors. The same is seen in the case of Apple Inc., although the P/E Ratio is vitally different by amount (Apple’s current P/E Ratio is 32.0, as seen in the Table 1.), comparing to HP (16.9), Microsoft (18.8) and Dell (16.4), it follows practically the same tendencies of increase or decline as all IT companies.

When the matter comes to deciding the ratio of the estimated Price – Earnings, Apple Inc. should not rely on the ratios of any of the other three competing companies. Apple Inc.’s current P/E ratio exceeds Microsoft’s, HP’s, and Dell’s by more than 10 points (Table 2.), and that is due to high price per share. The ratio most likely will stay up or even grow more because today’s Apple’s Earnings per Share are also relatively high at the point of 6.28, which means that corporate life is of a high stable level and profits are growing even in the conditions of recovering from the global financial crisis. Apple should rely on it’s individual straight average of ratio, only if overall IT ratios are observed with a steadying or leaping tendency we should expect that this would mean the same for Apple. Investors are practically the ones who to great extent impact on the company’s ratio. They influence the overall demand for company shares, making the prices to rise or to fall among the stock market. However the EPS is influenced by the behavior of the company itself.

While I estimated the expected price per share of Apple Inc., I had to take into account various factors that would impact Apple and the potential of production capacities and overall sales. In Apple’s case this is by a great deal influenced by the future innovations and the expansion of the Apple’s share of the market segment. The expected price per share can be evaluated by the following formula: ((Total Customer Base * Annual Revenue Per Customer * Possible Market Penetration * Net Profit Margin) / Cost of Equity) / Number of Outstanding Shares = Expected PPS. The variables of this equation can be identified from the statistics defining Apple’s recent market performance and from the corporate plans and goals for the upcoming periods. The majority of the needed information can be studied from the company’s financial statements and corporate budgets for the future. I expect that by the end of the year, under steady conditions Apple’s PPS will rise up to about 206 dollars per share. Today’s Apple Inc.’s prices per share are in a bullish rise, causing one to expect success if making further investments, however as all earlier practices showed, “what goes up, must come down” there still is a risk of a drop of share prices, which will happen eventually. The matter is to predict when this will happen in order to receive the most benefit out of this.