Rumors Pump Apple Shares to Another Closing High of $648.11

| Apple Stock Watch

Shares in Apple Inc. set yet another all time closing high on Friday, ending the day at US$648.11, up $11.77 (+1.85 percent), on heavy volume of 15.8 million shares trading hands. The stock was propelled by continued speculation about new products at the company’s September 12th media event and a price target bump from Peter Misek of Jefferies & Co.

AAPL Chart

AAPL Chart for August 17th, 2012
Source: Yahoo! Finance

Mr. Misek raised his price target to $900 per share from $800 after checks with Apple’s suppliers suggest the company is ready for the oft-rumored, much speculated iPad mini. Those checks also suggest that the iPhone 5 will also make an appearance at the September media event.

Apple hasn’t announced said media event, but the company did confirm it after online reports said an event would be held on September 12th. Since then, much speculation has ensued on what exactly Apple is going to announce, with the iPhone 5 and iPad mini both having near-universal consensus, with a side of Apple TV thrown in for good measure.

Speaking of Apple TV, Mr. Misek said that Apple is busily producing its first television, even though recent rumors have said that Apple is shying away from a full television set in favor of a full featured settop box.

Nonetheless, shares in AAPL have increased some 59 percent in calendar 2012, a huge increase that has made the company the most valuable corporation on the planet. The company’s market capitalization is $607.5 billion, well ahead of #2 Exxon Mobil, with a paltry market cap of $408 billion.

AAPL’s intra-high of $648.19 per share was also set on Friday, and this followed the previous closing high of $646.34 set on Thursday.

*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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Comments

wab95

I just saw Mr Misek on Bloomberg West. He went further with speculation on the nature of the ‘iTV’  as BW dubbed it, and how it might work, based on the rumour that Apple are in talks with at least one US carrier to provide live content.

Apart from this tidbit, there was nothing particularly novel in Mr Misek’s speculation about the Apple TV, the iPhone or the iPad mini that isn’t already consensus. Nonetheless, this was enough to nudge the stock to a new closing high.

Garion

A new record high for AAPL today? But ... but ...  how can that be? It wasn’t even a month ago that all the clever Wall Street analysts told us that AAPL was surely going down because Apple missed the analyst’s earnings expectations?

Oh, it’s all so confusing.
wink

Bryan Chaffin

Hey Garion, I thought your comment was a good opportunity to offer some clarity on how Apple’s value works.

What happened a month ago was not Wall Street telling us that Apple was doomed, it was Wall Street (in the form of investors big and small) pulling value out of Apple that had been previously been pumped into Apple based on expectations that were higher than Apple’s Q2 results and guidance.

What’s happening now is that Wall Street (in the form of investors big and small) is pumping new value into Apple based on expectations of new products that haven’t yet been announced.  Today’s record high was not based on what Apple is “worth” today, but rather anticipation of what Apple will be “worth” tomorrow (as in a nebulous future that is focused on, say, the next 3-12 months).

I hope that helps. smile

Garion

Hey Garion, I thought your comment was a good opportunity to offer some clarity on how Apple?s value works.

Hi, Bryan and thanks for the explanation. I appreciate it, all though I must confess that my closing remark about being confused was me being a bit facetious. Hence the winking smiley wink

But on a more serious note: Yes, I do understand that stock value is not based on the actual performance of the company, but that it’s rather governed by Wall Street expectations.

Having said that; I find it a little hard to see exactly what has changed between July 25 and now that can warrant such a steep increase in AAPL stock price all of a sudden? Aren’t we always expecting Apple to release new products that haven’t been announced yet?

Bryan Chaffin

Hey Garion, I knew you were joking, but this is a significant fundamental issue that many Apple fans seem to not understand, which is what I meant by “a good opportunity to add some clarity.” I definitely wasn’t trying to pin anything on you personally. smile

When Apple’s stock takes a hit, many people see it as Apple being unfairly punished, sometimes by evil analysts or other shadowy people who are manipulating Apple’s stock for their own benefit.

While there have been some examples of macro economic issues putting the smackdown on AAPL when nothing at Apple had changed, most of the quarterly corrections that have taken place are quite rational.

They key to understanding that rationality is that the value of the stock before a correction doesn’t exist in a vacuum. It’s not some absolute measurement of Apple’s value that belongs to Apple, but is rather a reflection of what investors think Apple is worth.

If investors say that Apple is worth $X because it will sell Y number of iPhones in one quarter or another, when Apple sells anything less than Y number iPhones or guides for less than Y number of iPhones in the coming quarter, investors adjust their opinion of what Apple is worth accordingly.

It doesn’t matter that Apple sold more or less iPhones (just as an example) than last year, or that it beat its own guidance because Apple has been playing games with its guidance for more than a decade.

The key point, however, is that the price of AAPL is not based on what Apple has done or even will do, but on investor expectations of what Apple did or will do.

Now, what’s changed since its Q2 quarterly announcements are news of an earlier-than-expected media event, and credible reports of not only the expected iPhone 5, but the iPad mini, and now even some new TV offering.

Investors are raising their opinions of Apple will be worth based on those new products. That is a specific change.

Some of that value has long been baked into the stock, of course. Everyone knew iPhone 5 was coming, and some value for a smaller iPad has also been slowly being added into the stock for the last 6 months. There has been less pre-announcement value on the Apple TV simply because the rumors have been all over the place for so long.

Now that these things are seemingly imminent, investors are placing their bets now, ahead of time. The reality is that most of the value of whatever Apple announces on September 12th will be fully baked in (if not over-baked in) by the time the announcement is made. Any rise or fall of the stock price after that event will represent a further adjustment of investor opinions that will either goose the stock or correct its valuation.

This is the reality behind the maxim “Buy on the rumor, sell on the news.”

Garion

The key point, however, is that the price of AAPL is not based on what Apple has done or even will do, but on investor expectations of what Apple did or will do.

Hi again, Bryan, and thank you for taking the time to elaborate on the subject.  Some of your points, like the key point I’ve quoted above, actually helped me better understand that strange convoluted game they call the stock market.

Sadly I’ll probably never become a player myself, as I can’t even afford a single AAPL share at todays price. I’m saving my $648 for the iPhone 5, you see grin

Bryan Chaffin

Ha! :D

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