Wall Street Hates Apple More With Every Passing Quarter

Moneybox
A blog about business and economics.
Jan. 24 2013 11:13 AM

Wall Street Hates Apple More With Every Passing Quarter

1359043321296

If you want to understand why Apple "disappointing" Wall Street with the fourth-most-profitable quarter for any company ever is a big deal financially, take a gander above at the price:earnings ratio of three major high-tech companies.

This is a way of measuring how optimistic Wall Street is about a given company's future. Given two equally profitable companies, you're going to be more eager to own a slice of the one with the better growth potential. So the more optimistic the investor community is about a given company, the higher its PE ratio will be. And in Apple's case, as the company has grown and grown the markets have grown increasingly pessimistic about its future growth. A couple of quarters back, it started trading at a PE ratio below Microsoft's. A huge upside surprise might have killed off that pessimistic sentiment and persuaded people that they're making some kind of fundamental error, but instead Apple delivered a small downside surprise on earnings that led to a disproportionate fall in share prices and an even lower PE ratio.

Advertisement

It's a little paradoxical because even after huge recent declines, Apple is still the most valuable company in America. But make no mistake—this is a company that Wall Street really doesn't like.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

  Slate Plus
Slate Archives
Nov. 26 2014 12:36 PM Slate Voice: “If It Happened There,” Thanksgiving Edition Josh Keating reads his piece on America’s annual festival pilgrimage.