Omor Ibne Ehsan
4 min read
Quick Read
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Apple trades at 37x forward earnings, which is twice NVIDIA’s 18x multiple, even though NVIDIA’s revenue grew 106% versus Apple’s 16%.
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Apple guided next-quarter growth at only 9 to 11%, while NVIDIA expects $108 billion in revenue and roughly 70% earnings growth next fiscal year.
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At 37x forward earnings with slowing growth and rising memory costs, Apple’s multiple has more room to contract than NVIDIA’s.
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Apple (NASDAQ:AAPL) closed Monday, October 19, at $342.94, just under its 52-week high of $348.15. NVIDIA (NASDAQ:NVDA) closed at $217.09, about 11% below its peak of $243.37.
Apple and NVIDIA are worth $5.00 trillion and $5.24 trillion. Yet you pay 37 times expected earnings for Apple and 18 times for NVIDIA, so Apple’s forward multiple is about 2.1 times NVIDIA’s.
Revenue growth points the other way. Apple’s June-quarter revenue rose 16.36%, while NVIDIA’s latest quarterly revenue rose 105.85%.
Trailing Earnings Narrow the Gap
On trailing earnings, Apple trades at 39 times and NVIDIA at 27 times, a gap of about 1.4 times. Forward P/Es rely on analyst estimates, and those estimates differ from one data provider to the next.
NVIDIA’s forward multiple is well below its trailing one because analysts expect EPS to rise from 9.3124 this fiscal year to 15.9146 next year. Apple’s two multiples sit close together, which signals slower expected growth. A multiple is most useful when compared with the growth it is expected to deliver.
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Apple’s Premium Pays for Stability
iPhone revenue rose 22% to $54.3 billion, Services set a June-quarter record of $30.7 billion, and paid subscriptions passed 1.5 billion. Apple also returned $33 billion to shareholders.
