Apple's Price-Earnings Multiples: Before and After Earnings Reports
On November 14, 2010 I published my most recent AAPL price forecasts and price targets. In that post I set a share price target of $363 for February 1, 2011 with a forecast price range of $346 to $380. On Friday, January 14, 2011, AAPL closed at $348.48 per share, in anticipation of strong December quarter results to be released on Tuesday.
At Friday's closing price AAPL is trading at 23 times trailing 12-month earnings. This multiple foreshadows a strong December quarter performance and the market's response to this week's announcement the iPhone will soon be available in the US on the Verizon network.
In preparing for revisions to my price forecasts and targets to be published soon after the release of the December quarter results next week, I researched the price-earnings multiples for AAPL just prior to and soon after the public release of quarterly earnings reports for the most recent quarterly periods. The data suggests no matter the recent rise in Apple's share price over the past few weeks, there's room for the share price to run following the release of December quarter results on Tuesday.
AAPL's Pre-Earnings P/E Multiples
The table data and graph below indicate the closing share price and price-earnings multiple on the 15th of the month and within a week of the release of quarterly earnings reports for the most recent four fiscal quarters. Apple's Friday price-earnings multiple of 23 times trailing earnings is within the range of recent multiples ahead of earnings releases.
Apple's Pre-Earnings Multiples
Date | Price | P/E Multiple | |
Apr 15, 2010 | 248.92 | 24.31 | |
Jul 15, 2010 | 251.45 | 21.35 | |
Oct 15, 2010 | 314.74 | 23.70 | |
Jan 14, 2011 | 348.48 | 23.00 |
AAPL's Post-Earnings P/E Multiples
The table data and graph below indicate the closing share price and price-earnings multiple on the first trading day of the month following the release of earnings reports for the past four fiscal quarters. The higher price-earnings multiple prior to the release of earnings indicate investors anticipated strong earnings growth and that anticipation has been partially priced into the shares ahead of the reports.
Apple's Post-Earnings Multiples
Date | Price | P/E Multiple | |
Feb 1, 2010 | 194.73 | 19.02 | |
May 3, 2010 | 266.35 | 22.61 | |
Aug 2, 2010 | 261.85 | 19.72 | |
Nov 1, 2010 | 304.18 | 20.08 |
Apple's Trading Range Following Earnings
Using recent history as guide and my own expectation of FQ1 results, I expect Apple's updated 12-month trailing earnings of about $17.75 per share following the December quarter results to propel the share price to my target price of $363 by February 1st and, depending on the content of the conference call with analysts on Tuesday including management's forward looking statements, above that price but within the limit of the trading range I forecasted in November.
It's expected the price-earnings multiple will fall following the release of earnings next Tuesday because the trailing 12-month earnings used in the multiple will be increased to include the eps growth reported in the December quarter. I expect the shares to trade in a range between 20 times and 22 times the updated trailing 12-month earnings through February and most of March.
It's expected the price-earnings multiple will fall following the release of earnings next Tuesday because the trailing 12-month earnings used in the multiple will be increased to include the eps growth reported in the December quarter. I expect the shares to trade in a range between 20 times and 22 times the updated trailing 12-month earnings through February and most of March.
Robert Paul Leitao
The data also shows that the pre-earnings report run-up is approaching a 20 P/E multiple based on ttm EPS of 17.75, which would be $355 a share v. Friday's close of $348.48
ReplyDeleteMakes it an interesting question for anyone who is going to do a earnings report trade.
Thank you Robert - good work.
Robert, this is excellent work, as usual.
ReplyDeleteDid you consider displaying charts with just the price data on one and just the P/E data on the other? I am visualizing that (without actually drawing it on paper), and it seems useful.
-capablanca
Ron:
ReplyDeleteThanks for the feedback. I'm not a short-term market timer so I shy away from specific price targets in and around earnings. Based on the recent pre-earnings and post-earnings trends I see Friday's closing price within a reasonable range ahead of earnings. Consequently, I do expect the share price to move at least modestly higher following Tuesday's earnings report.
I will be updating my price range forecasts and price targets soon after Tuesday's earnings release and expect the share price to reach $400 no later than the date outlined in my November forecasts. I do expect AAPL to hold a 20 times trailing 12-month earnings multiple following the release of the December quarter numbers.
Robert
capablanca:
ReplyDeleteI'll be following the share price movements relative to trailing earnings and the company's cash position rather closely over the next few months. I'll look at a series of graphs to illustrate the share price changes. Thanks for the suggestion.
Robert
Paul, please could you have a look at your RSS Atom feeds, I am getting errors and would like to subscribe!
ReplyDeleteThanks.
I'm sure you are busy but your Atom feed is in an infinite loop...
ReplyDeleteFix it!
Jon T:
ReplyDeleteThere's a problem with the blog gadget. The feed on the comments works but the feed on the articles is having issues. I'm searching for a solution.
Robert