Apple's $3 Trillion Valuation

Apple just released impressive quarterly results: $57.8 billion in revenue, 51 million iPhones, 26 million iPads, 4.8 million Macs, and 6 million iPods sold. So how should we value Apple? How much is a share of Apple really worth?

Let’s combine a few things to value Apple: (i) Warren Buffet’s intrinsic value model, (ii) market disruption theory, and (iii) jobs-to-be-done innovation theory. 

To read the headlines, you might think Apple is, again, doomed: “Apple’s Shares Slump on Weak Forecast” and “Apple iPhone Shares, Outlook Come Up Short” are just two examples. These headlines always encourage people to tell Apple what they must do. Here is a great list of past examples of “Apple must do…” (via John Gruber). 

If you look at any valuation number for Apple (for example, a P/E of 12.6, an EBITDA multiple of 8.4) it is remarkably low relative to its competitors (for example, Google has a P/E of 32.2 and an EBITDA multiple of 18.6).

To put this into perspective, if Apple had Google’s P/E,  it would be worth $1.2 trillion (yes, trillion with a “t”) instead of the $452 billion it is worth today. So why is Apple valued with a multiple so much lower than Google?