Apple More Valuable Than Microsoft By 2007? (AAPL, MSFT)

 |  Includes: AAPL, MSFT
by: Yankee Group

By Carl Howe

Following up on Friday's post about Apple versus HP, one hedge fund manager asserts that Apple's market cap could exceed Microsoft's in 2007. It took 2.5 years for Apple to grow from $6 billion to $60 billion in market cap. Microsoft's market cap is now $286 billion. The numbers work. But while Apple's growth is impresssive, the stock market almost never goes in a straight line. Regardless, this sounds like a great topic for a future comparison piece like the one I did on Apple-HP.

The one thing that makes me believe this prediction may be more accurate than we might think is Apple's marketing prowess. Name another tech company that has the same ability to convince consumers that they should lust after their products. That kind of marketing is a huge differentiator -- and hard to acquire.

That said, one of the rules I live by is that stock markets tend to over-react -- both to good and bad news. Apple was devalued as a company for a very long time. It is possible that it will be over-valued sometime in the next few years, maybe even in 2007. But all I can say is, call me when the P/E starts to exceed its annual earnings growth (currently in excess of 300%), and then I'll sell.

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