Apple or Microsoft, which is cheaper?

June 10, 2010 by
Filed under: Finances, Technology 

It is all over the news that Apple (AAPL) surpassed Microsoft (MSFT) market capitalization last week becoming the largest tech company from that metric perspective.  The question is which one is more expensive?

Assume you have $500 to invest and you are trying to decide which one is a better bet.  Let’s see.  On June 10th, Microsoft opened near $25 and Apple near $250.  So you could buy 20 MSFT or 2 AAPL.  So what are you really buying with your hard earned bucks?  Based on the prior 12 months and latest financial statements these are the numbers (rounded):

AAPL:  revenue $51B, Net Income $10.7B, Cash and Short term investments $23B, and a market cap of $227B (908 M outstanding shares).

MSFT: revenue $59B, Net Income $17.2B, Cash and ST investments $39B with a market cap of $218B (8720 M outstanding shares).

So if you buy 2 shares of Apple your $500 buy you $112 in revenue, $23.50 in NI, and $50.70 in cash.  Microsoft’s 20 shares are $135.3 in revenue, $39.4 in NI, and $89.4 in cash.  In other words, picking one metric, let’s say cash,  Microsoft is trading at 5.6 times cash, Apple at 9.8 times cash.  That is 1.76 times more expensive!

Now, let me throw Google (GOOG) into the mix, just for kicks:  Google was trading at around $480 with a market cap of $115B (240M shares).  Revenues of $25B, Net Income of $7.1B, Cash $26B.  You can buy 1.04 GOOG, meaning $108 in revenue, $30.8 NI, and an impressive $113 in cash (4.44 times cash).

So you tell me which one is more expensive?  I know, I know, this is based on past results and does not factor in growth potential, investor’s sentiment, cult followers, and other factors.  But for the same reason it clearly paints a picture of which company is more favored by investors and which one is less.

Consider one last point:  Microsoft hit an all time high of $58.37 on December 31, 1999, Google $724.80 on December 14, 2007, and Apple hit $272.40 on April 26, 2010.  Investor’s favoritism has been shifting over time.  What’s next for all these three?  If I knew, I wouldn’t be blogging about it but it is definitely interesting behavior of 3 of the most traded stocks.

Quoting Scott Adams, the creator of Dilbert, “I remind you to ignore me”.  By no means this is an endorsment to invest in any of these companies.  You, my fellow reader (singular) make your own judgment.

Enjoy.

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Comments:

2 Comments on Apple or Microsoft, which is cheaper?

  1. torialayna g. on Wed, 16th Feb 2011 3:52 am
  2. Apple stock went from record high to free fall within minutes Thursday. After a few minutes the Apple flash crash stabilized. But the price of Apple stock dropped $10. I read this here: Apple flash crash – $10 billion market cap loss in four minutes. With no clear explanation about the phenomenon, rumors included a Steve Jobs health scare, Verizon iPhone perceptions and short-seller chicanery. On the upside of things, if you wanted to invest in Apple stock, that would have been the best time to take out a payday cash loan and get in on the action.

  3. lfllmg on Wed, 16th Feb 2011 10:46 am
  4. Yeah! Interesting. Too bad the average investor cannot “jump in” withing 4 minutes. You can easily get killed if a stop order gets executed. Remember PG last year …Thanks for your comment.