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Yahoo BusinessAug 13, 2020
Is Apple's Lofty Valuation Justified? Analyst Considers the Case
Taking the top spot, Apple (AAPL) is the world's largest company by market cap. Valued at almost $2 trillion, the tech giant keeps swatting away whatever headwinds it encounters.The level of devotion it inspires among its fans is like no other. Mega-cap rivals Microsoft and Amazon might also be considered untouchable titans, but their brands and products do not sparkle with the same aura as Apple's offerings do.That said, should investors be comfortable with how much its valuation has increased recently? Deutsche Bank analyst Jeriel Ong took a look inside Apple's core, to explore why the giant from Cupertino has trounced all standing in its way over the last few years.The analyst lists six reasons why he believes Apple's valuation has expanded so dramatically: "1) S&P500 NTM P/E has expanded from ~17x from 2015-2019 to ~20x year-to-date on average and 23-24x of late; this has provided a tailwind to AAPL; 2) Risks of material unit share loss reduced (iPhone revenues largely stable despite negative preannouncements, iPad and Mac growing steadily); 3) AAPL has increasingly integrated their ecosystem together: 4) AAPL has increasingly shifted revenues/profits to higher services/software mix as a percentage of revenue, and as a result has a more consistent/stable margin outlook; 5) Wearables has risen driven by Watch/AirPods; 6) Shareholder return strategy increasingly valued."Pertaining to point three, Ong highlights what might be the most telling insight of all. Apple is not an iPhone company, b
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