The price of a stock can be calculated using a rather simple looking but in reality complex equation. Here's a very short simplified overview.
Stock price = (Earnings per Share) x ( A Multiple); or stated differently, the Multiple = Stock Price/ Earnings per Share = P/E ratio.
Apple's "trailing" EPS was $2.76 announced in its last earnings report. The Multiple is a very complex number based on many factors, but dominated by what the stock market thinks a company's future growth is worth. Apple has a high multiple, in the range of 30-40, because the projections for future growth are high. Thus, investors are willing to pay as much as 40 times current earnings for a share of stock, e,g. 36 x 2,76 = $99. The muliple is very sector related. In some high growth sectors like technology it is high and volatile. In others like farm machinery for example. the multiple is lower and not too volatile. Each sector has a characteristic multiple (P/E) range. Within technology, the computer sub-sector has its own "multiple range". When investing in a stock, it behooves the investor to know what that multiple is for a stock within its sector. Here are some good charts from Yahoo and Google that provide many financial stats and compare Apple to its competitors like HP , Dell and yes MS.http://finance.yahoo.com/q/co?s=AAPL
So, since we all want Apple's share price to go up, we want their earnings per share (after compensating for dilution--another topic), to go up AND we want investors to continue to pay a high multiple for Apple shares as a result of confidence that Apple will continue to deliver on its high revenue and profit growth.
Here's your quiz for the day: If we assume a multiple of 33 and Apple announces a "blow out quarter" of $4.00 earnings per share next week (unlikely because the Jan-March post holiday quarter is traditionally a slow one for tech stocks), what should the stock price be?
Reuters also gives a very nice set of financial stats with which to analyze Applehttp://www.investor.reuters.wallst.c...&ticker=AAPL.O