By Michelle Jones
Apple (NASDAQ:AAPL) stock is currently trading at about 13.8 times price to earnings, ex-cash, on consensus estimates for the next 12 months, carrying the company's market capitalization past $700 billion. Shares also are at more than two standard deviations from the mean multiple.
Stifel analysts note that this is similar to Apple's peak in early 2001. All graphs are courtesy Stifel.
In their report dated Nov. 24, 2014, analyst Aaron Rakers and his team said the median multiple right now is 10.2 times the same time period. They say right now investors are debating the proper multiple for Apple, and they don't see the current valuation as being "excessively expensive."
As a result, the Stifel team believes Apple's current momentum could raise its share price to $130 per share in the near term. That would represent a price to earnings multiple of 15.5 times estimates for the next 12 months.
In terms of EBITDA multiples, Apple stock is trading at about 8 times EV/EBITDA estimates for the next 12 months. That's higher than the median multiple of 6.2 times since 2011.
Apple's multiples peak
The analysts say Apple shares peaked at 8.2 times twice in 2012 after inching toward the median level in 2011. The stock's multiple has not hit that level since then, so now the Stifel team is wondering whether Apple shares will pass that level or if history will repeat itself.
Because Apple continues to generate strong free cash flow, they think investors may view EV/free cash flow as being important for valuing Apple shares. Looking at near-term consensus estimates for the next 12 months, they say Apple shares are trading at 12.5 times, compared to the median of 9.8 times. They add that the current levels are the highest Apple stock has seen since the middle of 2010 but significantly lower than the peak levels witnessed late in 2009.
Apple compared to the S&P 500
The Stifel team said another important consideration to make when valuing Apple shares is the company's overall size or ownership base compared to that of the S&P 500. At this point, Apple makes up about 3.8% of the S&P 500. That's the largest percentage since the end of 2012 and compares to the median percentage of 3.2% since 2011. In September 2012, Apple peaked at 5% of the S&P 500 before hitting a low of 2.6% the following April.
The analysts also say that when comparing Apple's P/E for the next 12 months compared to the S&P 500, it suggests that the company's stock has been trading at a discount since 2012. They add that Apple shares traded, on average, at around a 10% discount to the index from 2011 until now.
They say the recent run-up in Apple stock has left shares trading at about a 7% discount compared to the S&P 500, although they think it will be difficult for the stock to "return to parity" or trade at a premium.