Google and Apple are dirt cheap

Low multiples and strong growth forecasts should lure buyers, but Amazon looks expensive.

By Jonathan Berr Jan 5, 2012 12:57PM
Image: Dollar sign on keyboard (© Corbis)Google (GOOG), whose name has become synonymous with online searching, and Apple (AAPL), which has revolutionized the music and publishing businesses, are trading at historically low multiples. Shares of Amazon.com (AMZN), the largest e-commerce company, meanwhile, appear to be expensive.

Shares of Google are valued at a price-to-earnings ratio of 22.78, close to their lows for the past five years. The stock, which is up 11% over the past 52 weeks, has a slightly higher multiple than the S&P 500, which Reuters estimates at 19.31. Investors have got mixed signals lately about the stock.

The Benchmark Group downgraded Google from "buy" to "hold," citing concerns about a slowdown in Europe, where the company gets about 40% of its revenueIn late November, Citigroup upgraded the stock from "hold" to "buy," saying Google "has begun to show signs of margin stabilization, and its valuation has become more attractive."  The company, which analysts forecast will have sales growth of more than 36% over the next five years, has surpassed Wall Street expectations more often than not.  Its price recently topped $650, for the first time since 2008.

Apple has outperformed Google over the past year, gaining almost 25%.  Shares of the Cupertino, Calif. company are trading at a multiple of 14.94, near its lows for the last five years. Wall Street analysts are forecasting sales growth over the next five years to top 41%. Pipper Jaffray analyst Gene Munster, whom CNBC recently dubbed "the most notorious Apple bull on the Street," recently slapped an eye-popping $607 price target on Apple. That's about $200 above where it recently traded.

Amazon has underperformed Google and Apple, tumbling 4% over the past year. Wall Street analysts are concerned about slowing growth at the Seattle company. The shares are pricey. Its multiple tops 93, an historic high even with sales growth expected to pass 32% over the next five years.

Jonathan Berr does not own shares of the stocks listed here.

3Comments
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@bluetiger, I just went on Morningstar and saw Google's trailing P/E listed as 22.6, and Apple's at 14.9. That's pretty close to what this post says.
Jan 5, 2012 2:42PM
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this BS. both apple and google are listed on morningstar at way way above this.
avatar
apple and google probably hired those fired Enron accountants and I expect this is the year things fall apart for them
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