If Apple wants to change this false perception of its valuation, do a 10:1 stock split that would reset the current price to $35 a share and see what happens. Timeless Wall Street wisdom suggests the reason for a stock split occurs when a stock has needlessly stalled. If clients discover they can own AAPL at $35 a share with a forward P/E of 9 and a 95% growth rate they will definitely be more excited than they are right now.
2. For the past five years Apple and Google (GOOG - Get Report) have been tied at the hip as the two undisputed leaders of the stock market. At times, this relationship has benefitted the stocks but more often than not it has inhibited Apple's performance. It was Google who popularized the fad of letting your stock run without a split and Apple jumped on the bandwagon. It worked until it didn't. Google and its cool $600 stock price is in the midst of an 18-month stall. Apple and its cool $350 stock price is in the midst of a 7-month stall. The appetite for pushing a stock to $1000 a share does not exist in this market environment. It's time for Apple to permanently separate itself from the Google relationship.
3. As Google and Apple have stalled, Baidu has thrived. Since doing its own 10:1 stock split on May 12, 2010 the stock has doubled. Investors felt so much better about buying Baidu at $70 instead of $700. Whenever you start talking about stock splits the discussion turns to sentiment which is a turn off to some, but it's hard to argue with Baidu's recent results.
Does anyone think that Baidu could have risen to $1,400 a share as quickly as it has run to $140? Does Apple stand a better chance of doubling from $35 to $70 or would it be better off staying the course from $350 to $700? If you want to see Apple at its deserved 100 P/E do you think it could run from $35 to $218 or would it be better for Apple to try and run from $350 to $2,187?