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Apple P/E Ratio Headed Lower

Stocks in this article: AAPL BAC

Making a comparison between 2007 and 2010 is noteworthy because both are years of new product releases. On Jan. 9, 2007, Steve Jobs unveiled the first iPhone and it went on sale June 29. On Jan. 27, 2010, Jobs will unveil the Tablet, and it should be available sometime in the second quarter.

Both products are revolutionary, but the Tablet arguably is more so because it will single-handedly change the newspaper/magazine/book print industry as well as the mobile Internet and gaming sectors. The iPhone was not nearly as big of a game- changer in 2007.

Are the future prospects for Apple better or worse than they were back in 2007? Today Apple has approximately $40 billion in cash on its balance sheet, it has 3 billion apps downloaded through the App Store, the iPhone's international expansion is just taking off, and of course the Tablet is on its way. All of a sudden, seeing Apple stock at $210 doesn't seem very expensive at all.

As an investor, I have taken advantage of disconnects. I saw one in oil back in August 2008, I saw one in Bank of America (BAC) back in February 2009. This disconnect in Apple is bigger than either one of those.

Eventually, the market will get it right as it did with oil and BAC. The same thing will happen with Apple.

Shares of Apple closed Tuesday at Last Trade: $210.65, up $2.93, or 1.4%.

If you want to know how to maximize your investment in Apple through option LEAPS and you would like to invest 2010 alongside me, sign up at www.economictiming.com . This should be an eventful year for Apple shareholders.

At the time of publication, Schwarz was long Apple.

Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.

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