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Why Googling Apple finds share prices answers
Both Apple and Google are firms with great revenues and future prospects. But when you look at the share prices of the two companies, they seem to have lives of their own, according to Saxo Bank's Head of Equity Strategy, Peter Garnry.
Google's share price has gone up by around 50 percent over the last year, with quarter on quarter growth still very strong. However, Peter Garnry, believes that investors have been getting carried away; resulting in a stock price which is discounting an astonishing growth rate, one which is normally not achievable when you have a market capitalisation and revenue run rate around USD 100 billion, and a USD 400 billion market capitalisation for the company. Therefore, Peter is worried that Google's risk reward ratio isn't as attractive anymore.
Just over a year ago Apple shares were trading above USD 700.00, but Peter says the market sensed that something was wrong. The stock price now reflects a much slower growth rate and he believes that Apple's stock has corrected in line with the company's current position.
Peter Garnry points out that if Google were to be valued at the same level as Apple, then the firm would have to triple earnings - that gives investors an idea of how much future discounting is built into the share price.
Overall, he believes it's simply very difficult for any firm with a huge market capitalisation to achieve such enormous growth.
02:07 minutes
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