[czhiddy]

If you add in the same comparison to Facebook's numbers, the valuations look even more puzzling (using the most recent quarter):

* Apple's quarterly revenue: $75.9b * Apple's quarterly profit: $18.4b * Apple's market cap: $538.7b * Apple's P/E ratio: 10.24

* Google's quarterly revenue: $21.3b * Google's quarterly profit: $6.8b * Google's market cap: 517.6b (pre-earnings) * Google's P/E ratio: 35.37 (pre-earnings)

* Facebook's quarterly revenue: $5.84b * Facebook's quarterly profit: $2.56b * Facebook's market cap: $319b * Facebook's P/E ratio: 89.22

Do investors really think Facebook can grow at the pace a 89.22 P/E ratio suggests? They're quickly reaching the point where everyone in the world who can get a Facebook account already has one. They're pushing hard to spread to poorer areas by offering Internet access, but how much marginal revenue/profit can a poor rural farmer add? If Facebook somehow magically increased their numbers tenfold at the same growth rate, which would make their numbers roughly match Apple's, the current P/E ratio would make them a 3.19 trillion dollar company.

People knock Apple for relying too heavily on iPhone revenue, but Google gets a pass because their even more unbalance reliance on search has a "bigger moat"? Their core product, ads, is something most people despise and put up with, not something they seek out. Let's hope that some of their moonshots actually pan out.

[MCRed]

Now do Amazon which is a retailer, often running at a loss on the retail side, with a nicely growing Hosting business... but even the margins on the hosting business don't justify Amazon's P/E ratio.

I don't think the market is efficient, it has a lot to do with perception. Amazon, for instance, is constantly doing press releases for products, even products that have no future (this is a deliberate strategy near as I can tell from my time when I worked at Amazon)... while Apple does 3 or 4 product introductions a year, and doesn't do a lot of PR stuff (Though Tim Cook is getting interviewed a lot more than Steve Jobs did.)

[czhiddy]

I have a friend who works at Lab126 with some really interesting stories about the dysfunctional environment there. He's basically one of a handful or so engineers who have more than a 4 year tenure in his division. Their PMs are basically all fresh out of college. After the complete disaster that was the Fire phone, that team and its director got promoted and placed in charge of Lab126. As expected, everything went to shit.

No idea what the rest of the company is like, but internally, Lab126 employees treat it as a stepping stone until their resume or skillset becomes good enough for Apple, Google, etc.

[nl]

Apple will always have a lower P/E because the costs associated with building and selling physical products is higher.

Facebook's financials are ~1/3 Google's and so is its P/E. It's a much younger company and seems possible that's it's revenue and profit could approach Google's.

I don't see anything unbelievable or even particularly unusual.

[czhiddy]

> I don't see anything unbelievable or even particularly unusual.

Let's go back in time to a point when Apple's #'s roughly matched Googles.

https://www.apple.com/pr/library/2011/10/18Apple-Reports-Fou...

$28.27b revenue, $6.62 profit.

In 2011, Apple's P/E ratio hovered around 14, with a stock price that fluctuated around $46-$56 throughout the year:

http://financials.morningstar.com/valuation/price-ratio.html... http://www.nasdaq.com/symbol/aapl/historical

A P/E ratio of 14, and the company basically tripled their numbers in ~4 years. Does Google's P/E of 35.7 suggests we can look forward to a rough 10x increase in Google's numbers over the next 4 years?

[nl]

A P/E ratio of 14, and the company basically tripled their numbers in ~4 years. Does Google's P/E of 35.7 suggests we can look forward to a rough 10x increase in Google's numbers over the next 4 years?

No, it means that investors didn't believe there was much room for further growth at Apple[1]. They were clearly wrong! (Note that if you think that they are still wrong then there is a good opportunity to make money here!)

(Also, P/E is often related to margin as well as growth potential. Google's better profit margin is a factor here).

[1] http://www.asymco.com/2011/03/24/analysts-apples-growth-next... - the quote here is "The P/E ratio has remained at despondent levels for over two years.... The logical explanation is that pricing reflects a consensus that growth will fall off a cliff... Growth may slow to 18 percent the following year."

[tim333]

For Facebook current profits are about $6bn a year. To justify a 319bn cap they'd have to earn maybe $18bn /year giving a 18x PE, or about 3x what they do today. I think it's quite likely they'll achieve that in the next 5-10 years.

You've got remember the billions of rural poor will probably be less poor in a decade or two.

[microtherion]

That's quite plausible, but they have a $319B market cap today, so current shareholders would see their stock flatline over those 5-10 years.

[robotresearcher]

The bet with Facebook is that one day they'll figure out how to get a little bit of money out of all their users. On the day that happens they'll have huge revenues. Their user base is absolutely enormous.