updated 02:15 am EDT, Fri June 25, 2004
AAPL stock overpriced?
One analyst says that Apple could face problems, , and a falling stock price when the Fair Accounting Standards Board (FASB) Rule 123, which would force companies to expense stock options, kicks in, according to BusinessWeek: "Most analysts on the Street say they've already priced the cost of options into the Apple equation. And Apple does calculate those costs in a footnote of its earning reports. But its options exposure is high compared to other tech companies, Meyer claims. If stock options had been treated as a cost on the balance sheet, Apple's earnings would have fallen 69%, from 46 cents per share to 14 cents per share."
BusinessWeek also notes that Merrill Lynch's numbers (from April 2004) confirm the same analysis with Apple ranking "74th out of 86 tech companies in terms of how much estimated 2005 earnings could decline if stock options were to be treated as a line-item cost on the balance sheet.... By comparison, HP ranked 23rd, and Dell ranked 35th. With options expenses included in balance-sheet calculations, Apple's price-earnings ratio for fiscal 2005 would soar to 187, according to the Merrill numbers. Under those same calculations, Dell and HP would post p-e ratios of only 28.4 and 16.4, respectively."