$374? What In The World is Going On With Apple Stock?

| Analysis

What in the world is going on with Apple stock? With no good reason, on days the market is going up, AAPL goes down.  Although the market has been pretty awful over the last month, starting in late September, AAPL has taken heavier hits than most anyone else on bad days and not participated with the market in upswings.

You may remember that we reported on September 26th that JP Morgan’s Mark Moskowitz wrote that Apple cut iPad component orders for the fourth quarter. The next day AAPL fell about ten points. This story was more or less debunked the next day, and in poor market action Apple dropped about four points.

The following day is more interesting, however. On September 29th, which was a fairly good market day, Apple stock dropped about twelve points for, as far as we can tell, no good reason, and it didn’t poke its nose above water Friday or Monday. 

AAPL Daily Bars Compared to the DJIA

Two or three days isn’t a long time and not too important, but what might be is that the opening both yesterday and today gapped lower than the prior day’s close. This may well be due to a lousy market, but then again, it may not. With programmed trading becoming a stronger factor all the time, it may be that some funds are pushing the stock down a bit  more than is reasonable to squeeze the long options before the iPhone announcement on Tuesday. 

Why? The reason may be that Apple’s stock could soar during October if the market is up, or at least flat, over the course of the month. This would be due to the long festering pimple of investor expectations being burst (a gross analogy, but an apt one) at the iPhone 5 introduction. It will be quite hard to restrain the Apple stock once the cat is out of the bag. 

Apple is going to sell a jillion of whatever is announced tomorrow. Whether it’s one or two iPhones, it really doesn’t matter. The demand is just too great for any other outcome. Business Insider cites a note by Brian White of Ticonderoga Securities saying that opening day sales of the iPhone 5 is going to shatter the previous one day record of 1.7 million for a variety of reasons.

Perhaps the most obvious reason is  that the iPhone is being sold by more worldwide carriers now than when the iPhone 4 was introduced. Generally speaking, more vendors equal more sales. The rest of the reasons  can be lumped together as pent-up demand. 

As everyone who has gone through the seemingly interminable wait knows, it has been sixteen months since the introduction of the iPhone 4, a longer period than ever before. This means that outside of normal demand, a huge number of people on a two year contract have seen it end are going month-to-month, just waiting for a new subsidized iPhone. This author is one of them. After buying an iPhone 3GS when it came out on June 19th 2009 and having the contract end two years later, any fairly early adopters of the 3GS have been drooling at the thought of a new iPhone. 

If the new Siri and Nuance Powered Assistant thing is for real, a lot of iPhone 4 users are going to jump the contract ship and go for the new box of magic. Oh, and we forgot to mention that 41% of mobile users plan to buy an iPhone 5, according to an InMobi study we wrote  about last month. 

All of this portends phenomenal interest tomorrow—even by Muggles who don’t live and die by this stuff—and more free publicity than anyone could actually buy. Check that. With $76 billion in the bank, Apple could buy it, but it won’t have to.

This should take Apple stock up if gravity still holds and that should last until the new devices go on sale, when hard sales number will take the stock up even more. We can’t give out investment advice at TMO, but we’re just sayin’…

So hold on tight and prepare for lift-off. 

None of this naval-gazing should be taken as investment advice. In the spirit of full-disclosure, David Winograd owns a not insignificant (at least to him) position in Apple stock. 

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Comments

Lee Dronick

Well don’t buy today! Wait until tomorrow when the price goes up.

Bosco (Brad Hutchings)

After buying an iPhone 3GS when it came out on June 19th 2009 and having the contract end two years later, any fairly early adopters of the 3GS have been drooling at the thought of a new iPhone.

This is kind of funny, because I was that early 3GS adopter and ditched it for a full priced Nexus One 7 months later.

If the Verizon iPhone was the mythical Unicorn, and barely helped Apple tread market share water, I will have to dub the next iPhone the “Man Month”. There’s a difference though. It’s cute and optimistic to believe in unicorns. It’s stupid in this day and age to believe you can add more people to a software project and expect it to get done any faster.

Constable Odo

This is clearly a market I don’t understand when it pertains to Apple and Amazon.  Sprint’s $20 billion offer for the iPhone should easily have been enough to hold Apple from dropping as much as it did.  That’s a guaranteed $20 billion over four years.  However, Amazon’s debut of the new Kindles was able to give Amazon shares a $8 pop without Amazon even selling one tablet or that investors can even be sure that consumers will even have interest in buying the Fire tablet.  I’m sorry, but I just don’t get why Amazon investors are completely enthusiastic about their stock and Apple investors aren’t.  Apple seems to have the upper hand in fundamentals compared to Amazon and yet Amazon continues to glide smoothly over rough economic waters while Apple continues to get slapped about by the rough economic waves.

It is nearly guaranteed money in the bank that Apple will sell tens of millions of new iPhones in the blink of an eye and will likely get a lot of other smartphone users to switch which will thereby increase the iPhone’s market share.  Apple will be getting huge profit margins from the iPhone 5 and 4S variant (if there is such a thing).  I know the general market was down today, but Apple’s share price just keeps falling into earnings, so no matter how good quarterly earnings are, Apple may not make it back up to recent highs of $420 or so.  Apple is doing so well compared to the rest of the smartphone and computer industry and yet the stock is struggling just to hold steady.  I’m only pointing out that analysts’ price targets, if they mean anything at all, are getting further and further out of reach.

What allows Amazon to rise on future expectations but yet doesn’t allow Apple to rise even with hard revenue in hand is really a puzzle to me.

ibuck

One wonders if AAPL is being sold off in fear of the Kindle Fire being what media types like to call an “iPad killer” in hopes of churning up controversy, FUD and readership, despite some credible industry analysts quashing the idea that the Fire is a real competitor to the iPad. Or if the the new iPhone has a 4 in its name and is thus not able to “leap tall buildings in a single bound.”

jfbiii

I just don?t get why Amazon investors are completely enthusiastic about their stock and Apple investors aren?t.

I don’t think “enthusiastic” is the right term. IMO, it’s more difficult to manipulate Amazon than it is to manipulate Apple, because Apple gets far more coverage and thus day-to-day FUD or rumor-mongering lends the stock to being gamed.

Lee Dronick

I just did a simple comparison of several stocks, including AAPL, YHOO, MSFT, AMZN, and some non tech companies. All I did was look at the graph, not the price, and what strikes me is how similar are the graphs, the contour, for each stock. I don’t think that “investors” are making the decisions, I think software is doing it. Maybe I am not using proper science, proper analysis, but check it out yourselves. I used the Stocks app on my iPhone.

Edit: Of course there are individuals making buy and sell decisions, but maybe they are in the minority or are not moving the quantity of stocks as the big players using software.

heywally

I actively trade the markets. The deal IMO .... AAPL is used as an ATM by the bigger traders when overall heavy market selling takes over. Lots of profit always in it—and cash—so they push the sell button when they need to raise cash. A lot of these guys are leveraged in the market and do not have a choice but to sell when the overall market chokes. They sell AAPL because that’s where the cash and profits are.

Hopefully, AAPL will remain the perfect ‘buy the dip’ stock. Buy the dip, sell the rip - repeat as often as the market will manufacture.

chicochaz

it may be that some funds are pushing the stock down a bit more than is reasonable to squeeze the long options before the iPhone announcement on Tuesday.

In other words, “Manipulation.” Unfortunately, there are many who financially benefit in one way or another when a stock goes down and if they happen to be big funds and/or high-speed computer traders, the rest of us can only hang on and hope for the best.

Bosco (Brad Hutchings)

In other words, ?Manipulation.? Unfortunately, there are many who financially benefit in one way or another when a stock goes down and if they happen to be big funds and/or high-speed computer traders, the rest of us can only hang on and hope for the best.

Horse hockey. If you can predict it, you can profit from it. That is an axiom of the stock market.

SG

I’ve been following AAPL for a very long time, and this is about normal. The main reason is that AAPL dropped to 370 briefly when Steve announced he was stepping down. But the market recovered very fast when they realised that Apple’s got very strong fundamentals (and is pretty much locked in for the next two years anyway). AAPL rose a bit too quickly however.

This drop is the usual market correction before any major announcement as investors take profits. I expect it’ll be back above $400 before Christmas (if not this week depending on announcements).

Lancashire-Witch

It?s stupid in this day and age to believe you can add more people to a software project and expect it to get done any faster.

It was always a high risk strategy. In 1971 my boss, when faced with an impossible, approaching deadline, said - ” Nine women can’t have a baby in one month…”

anovelli

This is just typical front-running. No broker worth a mention isn’t hugely long outright and/or up to his neck in calls tomorrow. And I guarantee they have been getting their clients out creating these “corrections” just to get them the edge on their longs. Stops will get triggered above 410 or so and we’re off to the races, with the funds running to catch up and getting the brokers out anytime they want on the offer. The only sense in the market (short-term) is greed.

anovelli

In the short term, the only “sense” in the market is greed and corruption. I guarantee every broker has been adding longs on this “correction” as they oh-so-benevolently get their funds out of danger. They will gladly scale out of winners as the stops trigger the funds back in. Wealth gets extracted from the public at every turn. Funds are making what? Single digit percentages while brokers make orders of magnitude more… Why? It’s not talent or foresight - it’s proximity and privilege.

Paul Goodwin

If you plot the value of Apple stock, the DJIA, S&P 500, and Nasdaq over the month of September, the shapes of the curves are about the same. Apple has done better than all of those indices, especially over the last year.

In 3 years, it’s climbed at about $8.50/share per month. Heck, a month ago or two, one of the Wall St. firms announced the new Apple max value to be $550/share (almost a 50% gain). I predict it will hit that $550 number in about 20 months. I’d bet a cup of coffee on it. I bought some at ~ $265/share in June 2010. I’m not worried. Buy AAPL tomorrow, and you’ll make about 2.5% per month on your money; for as far into the future as anyone can estimate.

The economy stinks, and I think investors are wary about the purchasing power of Apple’s customers and potential new ones. But Apple has the mojo working and I see no sign of their floundering. Buy more, make more, sell more. It’s an engine.

The recent dip is a perturbation caused by computers using bad data, probably inputted by confused humans. Or (as stated above) the corruption is so bad in some very high dollar houses, that they’re producing these effects for short term gain. Spread fear and buy when the dummies sell during the skid, then announce all is well. All it takes is a plan, a lot of computers, and a lot of money -  that’s Wall St. The world’s most sophisticated pirates.

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