Is Apple still a bargain at $500?

A decade ago, a share of Apple barely cost $10. Now it trades well above $500 -- and optimistic investors say the good times will keep on rolling.

By TheWeek.com Feb 27, 2012 3:48PM
Image: Arrow Up (© moodboard/Corbis)Apple (AAPL) stock is now trading well over $500 a share (hitting $527 Monday afternoon), making the company more valuable than Google (GOOG) and Microsoft (MSFT) combined. 

Needless to say, investors are happy: A $10,000 investment in Apple in 2000 "would be worth about $966,667 today," writes Chris Dumont at Investopedia. But Apple's meteoric rise presents a conundrum, too: Investors are torn between curtailing their spending on the increasingly pricey stock, or doubling down to reap more profits.

Can Apple's share price keep climbing?

Yes. Apple has a lot of room to grow: Apple sold 37 million iPhones last quarter, says Dumont, and that's still "tiny in comparison" to the overall cell phone market, which is expected to increase to 2 billion units in 2012. Apple has only just begun selling iPhones in China, where the potential for expansion is massive. Don't forget the iPad, either. Apple believes tablets will eventually eclipse personal computers in sales, and "with the iPad being the dominant tablet, Apple should benefit," 
says Dumont.
 
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Apple may be too big to succeed: Apple is now the biggest company in the world, and it's "running up against the law of large numbers," says James B. Stewart at the New York Times. It's hard to keep racking up massive profits when you get this big. For example, a company with $1 billion in revenue would need to rake in an additional $200 million for a 20% increase. Apple, which brought in $46 billion last quarter, would have to better that by $9 billion next year for the same percentage increase. That will be awfully difficult. And in tech, "history suggests that excessive enthusiasm often precedes a fall," says Stewart. Remember Cisco Systems? It was valued at $557 billion in 2000 -- more than Apple's current $500 billion -- and is now hovering in the $100 billion region. 


It all depends. Can Apple keep innovating? Apple is "still a cheap stock," says Paul R. La Monica at CNNMoney. However, the company is "on a phenomenal winning streak" with the iPhone and iPad, and its continued success depends on its continuing to be a consistent iconoclast. "What will be the new iWonder?" Is it a product "nobody can even imagine yet?" Apple has to "keep innovating," says La Monica -- and it has to do so without Steve Jobs, acknowledged to have been the company's "creative spark."

More from The Week:

2Comments
Feb 27, 2012 4:17PM
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Im long apple.  Im kicking myself for buying and selling apple so many times.  This time Im sticking with it, I expect it to go far.
Feb 28, 2012 8:29AM
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Apple should pay the Native Americans for their Land!
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