×
Pro Analysis

Santoli: Tech not cheap when you strip out Apple

Apple logo and financial chart
Dado Ruvic | Reuters

To the eyes of many seasoned investors, technology stocks look like a pretty sweet deal.

In aggregate, the tech sector trades at a slight discount to the broad S&P 500 index valuation of around 17 times the coming year's earnings, despite tech's superior long-term growth and typically high profit margins.

But any investor reaching for tech had better like the taste of Apple. Because Apple produces such an outsized share of all tech profits, has such a heavy weighting in the index and trades at such a depressed valuation, it makes the entire sector appear far cheaper than it is.