Can Apple Break Past Its 18 P/E Curse?

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By Jacob Maslow

Original Macintosh - 1984
First Macintosh, 1984

Apple (NASDAQ:AAPL) is a great stock to have. If you are an Apple shareholder, a lot of people would be envious of you. You are in a great position. However, if you are looking to buy into Apple, you might want to hold off a little bit. Apple is actually operating with a curse. Seriously.

I don’t want to sound all metaphysical or superstitious on you but looking at Apple’s stock performance since 2012, it appears that there is this invisible boundary Apple stock can’t cross. What boundary is this? Eighteen price per earnings ratio. If the price of Apple reaches 18 times its diluted earnings per share, it crashes, or it stagnates. This is not a hokey theory. If you look at Apple’s stock’s performance since April 2012, it can seem to go past that 18 PE boundary. It appears that some sort of tractor beam pulls down Apple’s stock prices once it gets close to that 18 times diluted earnings point. You only need to look at October 2012 when the stock crossed that line and guess what happened? The price of Apple almost fell apart. It took a while for the stock to recover.

I know this sound like a bit of a hater talk, but it isn’t. It’s just a cold, hard look at Apple’s performance. It seems to have a problem getting past that 18 price per earnings ratio barrier. While small tech companies like Tesla can easily do this, they’re much, much smaller. As a company gets larger, it is bound by price per earnings considerations. Since Apple is the largest stock in the world, it’s definitely in the grip of price per earnings rules. It’s anyone’s guess, whether Apple can finally break free of this pattern or its stock might succumb once again. It tried several times in the past, but so far, it hasn’t succeeded breaking past that 18 PE barrier.

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