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

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.