Apple Stock Recovers in “Interesting Times”

| Analysis

Apple’s stock staged a remarkable recovery Tuesday making up all for all the losses from Monday, and then some. On Friday, AAPL closed at $373.75 and the carnage of Monday took it down 5.46% from there to close at $353.35.

As with Monday’s session, the volatility of Apple took it on a wild ride with more ups and downs than a good roller coaster, but in the last hour of trading, the stock shot up 19.61 points to close at $374.60, a gain of $20.80 (+5.89%). If you bailed yesterday from sheer terror, you would find it very hard to sit right now.

Are we surprised over this? In a word: No. Was there any logic to it all? Of course not. How, in an environment where S&P downgrades treasury bonds and the next day the market tanks with the only thing selling being treasury bonds can there be any logic? How, in a market where the Fed says that they will keep interest rates near zero until at least 2013, and the market tanks immediately—putting the Dow Jones Industrial Average (DJIA) into free-fall—can there be any logic? Take a look at Tuesday’s price action.

Apple stock price chart for 8/9/2011

AAPL Chart for August 9th, 2011

 

In the market drops of both 2008—and even 1987—there was a great rebound within a few days. If you think yesterday was bad, go back to 1987 when the stock of our favorite fruit crashed 18% in one day on a downgrade from Morgan Stanley and RBC.

In fact, during the month of September of 2008, Apple dropped 35%. Did this reporter sell his? Of course not. Did a huge number of individual Apple stockholders sell theirs? It became a feeding frenzy to get out of Apple at any price.

On Black Monday, also known as October 19, 1987, the DJIA dropped 22.61% bringing it to 1738.74. Yes, we have our decimals right. We went from around 1800 to around 12,000 in just over 20 years. This speaks well of the resiliency of our markets. If you held onto your stock during both meltdowns and waited a bit, you would have done much better, for the most part, than selling into the widening pool of fear and greed and then buying when the waters looked safer. 

Earlier today we noted that that the market cap of AAPL had overtaken that of Exxon-Mobil intra-day giving it the highest market cap of any stock on any market in the United States. Just to clarify a bit, a market cap or capitalization is the number of all the shares of that stock multiplied by the price of the stock. That’s pretty amazing when you think that only ten years ago, the market cap of AAPL gave it the position of 287 on the S&P 500, well under the middle. Today it’s ready for it’s close-up and likely to close at number one any day now.

Unfortunately, Exxon overtook Apple in the last hour of trading closing with a market cap of $348.3 billion. Apple had to settle for second place since all its stock was only worth $346.7 billion. But market caps are moving targets, and with a mere $1.6 billion to go, Apple is well positioned to be the top dog.

Can you believe how much money we’re talking about? We find it hard, too. Can you believe that Apple has more free cash than the United States of America? As I’m sure you’ve read, Apple has $76.2 billion while our penny-ante Government only can cough up $73.8 billion, and the Government can turn on the printing presses any time it wants. However, Apple can come out with the iPhone 5 any time it wants, which may be worth more than the Government printing presses. In this we are only being slightly facetious. 

We remember when Michael Dell in 1987 told the Gartner Symposium when asked what should be done to fix Apple: “What would I do? I’d shut it down and give the money back to the shareholders.” An old Chinese proverb says “May you live in interesting times.” We think that we do. 


Wall Street Journal Video discussing Exxon v. Apple Market Caps

 

Comments

furbies

We remember when Michael Dell in 1987 told the Gartner Symposium when asked what should be done to fix Apple: ?What would I do? I?d shut it down and give the money back to the shareholders.? An old Chinese proverb says ?May you live in interesting times.? We think that we do.

On a whim I emailed michael_dell@dell.com and got a response….

Dear Mr Dell

Do you remember in 1987 saying that Apple Computers should close it’s doors and refund it’s shareholders money ?

Mr Michael Dell told Gartner Symposium when asked what should be done to fix Apple: “What would I do? I’d shut it down and give the money back to the shareholders.”

What do you say now ?

His response:

Huge congratulations to Apple on all their success but my comment was widely repeated was taken massively out of context. Anyone who was there in person and heard the entire conversation in context would know that. As the founder and CEO of Dell I do not think about what I would do if I were running another company, do not offer advice for other companies and did not think about it a decade and a half ago.

My point was I had no desire to answer the question. My answer was a non-answer. If you were there and heard my first two answers to the question….I said, I’m not going to answer that, give me a different question. The point I was trying to make with my answer.. there was no point. I did not want to answer the question because I am the CEO and founder of Dell and don’t think about running other companies. The whole thing is pretty silly… This should not take anything away from Apple’s great success. Again, Congratulations to them.

At least he’s generous in defeat…......

John Dingler, artist

Yes, David, the US can print money, likey at a faster rate than Apple can attract money. The huge Ayn Randian, Alan Greenspan, even affirmed this recently. He literally said that. Never before has AG been as forthright regarding fiscal/monetary policy. It was astounding to hear.

Because Greenspan is correct, there was never any need to cut back on SS/Medicare and kick old people out of home,s and the sick from welfare rolls, and Aid to Dependent Children cut back, in order to take a vindictive stab at balancing the budget.

John Dingler, artist

Yes, David, the US can print money, likey at a faster rate than Apple can attract money. The huge Ayn Randian, Alan Greenspan, even affirmed this recently. He literally said that. Never before has AG been as forthright regarding fiscal/monetary policy. It was astounding to hear.

Because Greenspan is correct, there was never any need to cut back on SS/Medicare and kick old people out of homes, and the sick from welfare rolls, and Aid to Dependent Children cut back, in order for Teabaggers to take a vindictive stab at balancing the budget.

If the gubm’nt wants to cut back on expenses, it could eliminate the need for Microsoft-inspired virus software by replacing the moth-ridden and virus-infected Windows OS with the way safer MacOS/iOS as well as issuing iPads to replace the many overpriced and unneeded Windows PCs.

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