Chart of the Day – $AAPL Today vs. $MSFT in 2000

AAPL is making waves as it touches $400 today.  The -6% move is also the second-largest this year, after the -12% move on its January earnings report.  These are especially large moves considering that Apple is still a $375 billion market cap company.

I take this as one more sign that AAPL pessimism is starting to get excessive.  I think AAPL is undergoing a major shift, similar to what MSFT experienced after its 1995-2000 run, where MSFT turned into a value stock that did not do much for many years.  I expect AAPL to be a long-term value stock, which is certainly worth something, but anticipate that its heady growth days are behind it.  Along those lines, here is the comparison of AAPL over the last 5 years (in black) vs. MSFT (in orange) from Jan 1, 1996 to Jan 1, 2001:

MSFT vs. AAPL, 5 year analog, Courtesy of Bloomberg

MSFT vs. AAPL, 5 year analog, Courtesy of Bloomberg

MSFT essentially bottomed around $20 in December 2000, and traded between 20 and 37.50 for the next 7 years.  So there was value to be found in MSFT stock after its steep selloff, but it never recovered its prior glory.

I think AAPL is nearing its region of value this time around, but don’t expect it to recover its prior glory.  $300 would be great value, but even around $400, we’re getting close to asymmetric risk/reward.