Apple vs. H-P: Buy Me Apple Stock for Christmas (AAPL, HPQ)

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 |  Includes: AAPL, HPQ
by: Yankee Group

By Carl Howe

I've been watching the articles being published about Hewlett-Packard (NYSE:HPQ) the last couple days as Mark Hurd put forth his vision in New York City on where the company was going. One of the big sound bites has been to look for the company to grow 4 to 6 percent in revenue in 2007. The company's stock price has been up more than 40% this year in anticipation of such growth projections.

Meanwhile, Apple (NASDAQ:AAPL) suffered two downgrades this week based upon stock valuation, despite having the hottest product in the hottest consumer electronics category this Christmas.

This got me to thinking about how the prospects for HP fare compared with Apple. So I put together the following table to compare the two companies:

Hewlett Packard Apple
Revenue $86.7 billion $13.9 billion
Trailing Price/Earnings 35 46
Profit margin 3% 10%
Operating margin 6% 12%
Quarterly revenue growth year-over-year 7% 57%
Quarterly earnings growth year-over-year -62% 306%
Cash $13.9 billion $8.3 billion
52-week stock price change +43% +121%
Click to enlarge

After looking at that table, it looks to me like the analyst ratings of the two firms are backwards. Yes, Apple is a much smaller company. But Apple's pipeline of new products and services looks extremely strong. It has a billion-dollar software business that makes Microsoft-like margins, yet few people recognize. The company is about to compete with HP in computers, but with better style, a more secure operating system, and better software bundles. And the iPod is generating both excitement and revenues like there is no tomorrow. Heck, even the head of HBO wants to put his shows on Apple's iPods. And the Associated Press acknowledges that Apple sets the pace in consumer electronics. It's only a matter of time before people realize the stock will continue to do the same.

In the interests of full disclosure: I am not a financial analyst, I do own some Apple stock, and your mileage may vary.

Related:

  • All articles on The Consumer Electronics Stock Blog by Carl Howe.
  • The complete list of companies (and links to articles about them) covered by The Consumer Electronics Stock Blog.