$AAPL Falls to 10-Month Low of $525

| Apple Stock Watch

Shares of Apple Inc. fell to a ten and a half month low on Thursday, closing at US$525.62, down $11.26 (-2.10 percent), on heavy volume of 28.2 million shares. That's the lowest close since February 27th, when $AAPL closed at $525.76.

AAPL Chart

AAPL Chart for November 15th, 2012
Source: Yahoo! Finance

The stock has fallen $176.48 since hitting an all-time high of $702.10 on September 19th, a 25.1 percent decline that puts the stock well into official bear territory. The stock is still positive on the year, up $120.62 since closing 2011 out at $405, a gain of 30 percent.

That's small consolation to anyone who has purchased the stock in the last few weeks, however, and if the stock remained at these levels in the closing weeks of 2012, a 30 percent gain would make this the poorest performing year for AAPL in some time.

AAPL Chart for the Year

AAPL Chart for the Year

Bear factors weighing on the stock include a lot of selling before capital gains taxes rise in 2012, broad macro economic concerns, European worries, and growing fears that Apple has lost its magic (to be overly succinct on that last factor). This, despite the fact that Apple continues selling product hand over fist.

On Thursday morning, TMO covered a Cowen & Co. report that found iPad mini was enhancing iPad sales, rather than cannibalizing them. Several major analysts have also come forward with various incarnations of Apple's fundamentals remaining intact.

That hasn't had an apparent effect on Apple's stock, however, as it has continued to pull back. The stock is trading at less with a P/E of 12x (roughly 10x if you pull out the company's $121 billion cash hoard). This is very low for a tech company, especially a tech company like Apple that continues making money hand over fist.

In comparison, IBM's P/E is 13.35x, Microsoft's is 14.5x, Google's is 20.44x, and Amazon's is 2,979.82x (that's not a misprint).

If the bears have it right, Apple is doomed to a future of mediocrity. If the bulls, which includes almost all of the Wall Street analysts covering the stock, have it right, this is a temporary retreat that represents a buying opportunity.

Even Doug Kass of Seabreeze Partners, the man who helped spark Apple's sell-off with negative comments in October, has said the sell-off is overblown and that he is a buyer. That was when AAPL was at $547 a share, however, and it would seem that investors aren't yet interested.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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10 Comments Leave Your Own

daemon

How’s that 1.65 million stocks purchased by Rochdale impacting the stock price? I mean, the firm only had 3.5 million dollars of their own money, and some how they bought 1 billion dollars worth of Apple stock?

geoduck

Apple is, as you put it, been selling products hand over fist. Selling anything and everything it sticks it’s logo on. In addition Apple just refreshed nearly it’s whole product line and introduced a new product, the iPad Mini, that is selling as fast as they can make it. Apple remains popular with consumers and all of the ‘issues’ with Foxconn and Greenpeace, and executive reshuffling, and such have passed unnoticed by the average consumer. They have a solid line of products that is getting good reviews, customers like, and has a level of fit, finish and build quality that other companies cannot match. Apple is the gorilla in the tech world.

SELL!!

Lee Dronick

See today’s Joy of Tech comic http://www.geekculture.com/joyoftech/joyarchives/1769.html

skipaq

Bryan, you didn’t mention the impact of the presidential election on the markets. Just take a look at the losses in the last week. There is a great deal of uncertainty in the financial community that is directly tied to the election results. Until the economic direction becomes clear, I doubt there will be much of a rally. If economic policies continue to hammer business, then this trend may worsen.

Bringing up politics may be unpleasant; but it is the major concern of most investors. Personally, I considered getting out of the market completely when Apple hit $700 and staying out until after the election was over. I risked the election going the other way and lost a chunk of those gains.

The election results can be seen as the backdrop for the causes you listed. As an investor not wishing to see the rest of my gains vanish, the economic talking points coming from this administration have me leaning toward getting out while ahead. This outweighs all the numbers and projections.

Bosco (Brad Hutchings)

Apple has a crisis of leadership right now. There are two different narratives about Scott Forstall. One is that he was the heir of arrogance needed for Apple to be Apple. The other is that he botched a whole lotta things in his final year: Siri, Maps, and I’ll add completely f’ing up Mobile Safari for web apps. We don’t really know which is the better explanation of him getting dumped. That leaves a lot of uncertainty about the future of Apple. Has it gone from a fiercely competitive, take-no-prisoners, seek and destroy Leviathan to a Barney cult where everyone holds hands and gives each other completely platonic back rubs? Or can it just not avoid stepping on its own member?

As I stated in my prediction that AAPL would be sub $530 at end of year, the real reason is that Apple does not have an opportunity between now and January to really change the narrative, or just put a definitive one out there and settle this Forstall thing. The problem is that Apple has him locked up until some time in 2013, so he’s not going to be able to add and information to the mix. So what we have to rely on is the AAPL stock fluffers like Wu, Um, and Herman Munster to blow sugar onto the tea leaves.

Terrin

Bosco:

Nice try. Apple’s leadership has very little if nothing to do with the drop in Apple’s stock.  Apple has lost leaders in the past.

About a month ago the DOW was at about 13, 800. Now it is at around 12, 500. The whole market is down, and Apple certainly is not immune to that. Google is down significantly as well. If anything is to blame for Apple’s stock price, it is our government’s failure to implement sound economic policies.

Many companies are wondering what their tax rates are going to be next year. Further, many are selling stock right now because of the increase in the capital gains tax rate coming up. Further, there clearly has been a concerted effort to drive Apple’s stock price down. For a while there, we’d hear various rumors from anonymous sources that would negatively effect Apple, which were proven false shortly after.

Warren Buffets working premise is buy when others are running. It seems to have worked for him. Apple is on solid ground. It owes no debt. It pays a significant dividend. It’s product sales are healthy.

everygamer

I think what is really going to hurt Apple’s long term stance is the following ...

1. Price

Android devices are gobbling up the Smartphone & Tablet markets because they are less expensive and offer the same services (phone/music/video/apps). Apple’s phone market share has dropped from mid-40% to mid-20% over the last 3 years and Android has gone from 5% to 65% in the last 3 years. Apple had 70% of the tablet market just a year ago, but in the last year it has dropped to mid-50%.  What this shows is that as the market grows, Apples share of the market is not growing with it. Apple devices are sold at very high margins, this is why they have so much cash on hand right now. (Example, Apple iPad Mini = $320, Amazon Kindle Fire HD = $200)

2. Competition

Apple may have started the revolution, and they had a head start, but the field is now full of competition. Google w/ Android and Microsoft with Windows 8 have provided solid choice for customers. At the end of the day its not the hardware, but the services that people want. Phone calls, music, video, games, apps and internet, and these things are all offered by the competition with equal and in some cases greater content offerings. So is it worth to pay 20% more for a brand, when you can get he same thing in another product. Keep watching Apples market share, this directly answers this question.

Also, Apple’s business model historically has been a limiter for them. In the 1980’s Apple had a significant market share in the home computer market 15%, when there were dozens of companies cutting up that pie. They were a leader, innovator, but they were again priced high and they refused to let anyone else build their hardware/software. The PC was introduced and used interchangeable parts, so you could have a PC built by 10 different companies using the same parts that were all standardized. So a common platform, and then a common OS in MS DOS/MS Windows. This quickly generated heavy competition and brought prices down on PC’s and software, making PC’s more attractive to businesses. This lead to the PC platform, and conversely Microsoft taking 95% of the market share by 1995, and Apple only had 3% market share. This appears to be mirroring what we are seeing today with phones/tablets. If Apple opened up their platform, and let other manufacturers sell devices with iOS or Mac OSX, they would have a vastly better chance of competing over the next decade. Google/Microsoft are keeping with the multiple manufacturer, single OS strategy, and the market shows this creates better pricing for consumers.

Learn from your history Apple, or you may repeat it (just a little slower this time sense they have a bunch of cash to react to the market changes)

3. $120 billion in cash

As much as you might think that it is a good thing for Apple to be sitting on this money, to investors it is not. It represents money that Apple could be using to make more money in investments. Anyone with a financial background will tell you that money over time looses value to inflation, so money that is not invested and generating a return greater than inflation is the same as loosing money. Investors view Apples cash reserves as a serious negative, as it could be used to further the business and generate massive returns while Apple has the hype and influence in the market.

everygamer

4. Innovative

Apple has built their brand on innovation, but now they are releasing iterative or reactive products. The iPhone was innovative, the future models had for the most part software innovation but nothing drastic beyond core improvements in hardware. The iPad was innovative, but its future releases have just improved performance or core features. The iPad mini is in direct response to the successful sales of 7” Android devices like the Amazon Kindle Fire or Google Nexus, so reactive. That said, when most analysts go back and look Apple was not very innovative even with the iPod, iPhone or iPad. These devices took existing technology and concepts and for the most part improved on them. The first digital MP3 player was released 3 years before the iPod. PDA’s with touch screens, installable software and phones built into them were available for several years before the iPhone (Compaq, HP, IBM all had released devices like this). Tablet computers with touch screens were available for several years before the iPad (Toshiba, Acer, HP all had devices like this). For the most part many of these products were used in business, were expensive and were not packaged for retail, because the technology was not small enough yet to make it inexpensive. Apple brought these things to consumers as consumer products at just the right time. The reality is that the most innovative thing they did, and what really made all of these consumer products viable in the first place was iTunes. They had an easy to use store that could download/push the content right into the devices with little effort. This was something that none of the other companies did, early MP3 players didn’t have it, early tablets didn’t have it, early phones didn’t have it. If iTunes didn’t exist, the iPod, iPhone and iPad would never had been as successful as they were.

So the question is, if the core innovation happened over 15 years ago, what have they really done since. The fact that they are going into litigation mode, and suing everyone means they have gone from market leader to defending their stance in the market. This is what investors are seeing, this is why Apples stock is eroding. Actions speak louder than words.

5. Market

Last but not least, the entire economic market in tanking right now due to the debt celing, and investors expectation that taxes are going to rise next year so they are selling out now while it will be on 2011 tax rates.

everygamer

Correction: 2012 tax rates smile

everygamer

Terrin:
” Apple is on solid ground. It owes no debt. It pays a significant dividend. It’s product sales are healthy.”

I agree with your statement. I don’t feel the issues I pointed out in my previous posts will put Apple in the hole again (Microsoft bailed them out of going bankrupt in the 90’s) but I think what is going to happen is that their market share is going to continue to shrink, and they will easily loose their market leader status. In the long run, it will likely be Google/Microsoft that will control the majority of the market based on past history and how things are lining up.

Apple is a unique company in that they have a very strong fan base. Companies pay billions to build a customer base like what Apple has, and still don’t succeed in doing it. This fan base is carrying Apple right now, especially in sales. This can be seen in the fact that 70% of iphone/ipad sales are to customers who are upgrading past devices. That mean’s that only 30% of their sales are to new customers and explains why their market share is shrinking as the market is growing (people converting from non-smartphones to smartphones or buying tablets instead of laptops).

The question is, what happens if the fan base looses its faith in Apple? or they decide that the $500 iPad is not getting them anything special versus a $300 Android/Windows tablet?

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