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Concern about the health of Apple's co-founder and chief executive has reportedly been one factor damaging stock prices.  (Source: Cupertino City Council)
Concerns about overvaluation, succession are top on investors' list

By market cap Apple Inc. (AAPL) is the world's biggest tech company, having recently passed Microsoft Corp. (MSFT) for that spot.  Apple also recently passed Microsoft in quarterly profits.  And the company blows past analyst estimates virtually every single quarter.  Still, all is not well for Apple in investors' eyes.

Apple stock hit a high of $364.90 in February 2011, and has since churned, cycling up and down.  But since the start of June there's been consistent downward momentum, which has dropped the stock to well below its cyclic lows, plunging it to $315.32 USD a share at the bell on Monday, June 20.

Most analysts attribute that 15.7 percent drop to uncertainty about the succession plan for Apple, after the departure of chief executive Steve Jobs.  Mr. Jobs, who co-founded Apple in 1976, returned to the company in 1997 and transformed it from a struggling boutique vendor to the world's largest gadget maker.

But with Mr. Jobs suffering from complications of pancreatic cancer, which caused him to need a liver transplant, his health has been a major concern over the last several years.  Most recently Mr. Jobs took yet another medical leave of absence, though he's still giving public presentations and attending company meetings.

Henry Blodget at Business Insider writes:

In a way, the situation Apple finds itself in is akin to an impending CEO retirement--without a successor having been named. In such "lame duck" periods, companies can become paralyzed, as managers focus more on their own future and political stature and uncertainty and less on the business.

And, in Apple's case, unfortunately, the situation is even worse: No one knows whether Steve will return, or when, or even when the question of his return will finally be put to rest. So the company is in a sort of perpetual purgatory.

The source of Apple's stock drop may also be of a more technical nature.  In terms of price-per-earnings ratio, the stock is somewhat overvalued at a P/E ratio of 15.0 (by contrast Microsoft has a 9.7.  P/E ratio isn't always the best judge of performance, but some fear that Apple's stock has risen too far, too fast.

Additionally, some believe the options markets are dragging the stock down as trading was flat for much of last week until Thursday-Friday.  However, a 1.5 percent drop on Monday dispels that theory somewhat.

Some investors still stand firmly behind Apple.  Andy Zaky of the Bullish Cross says that Apple stock will likely reach $500 USD/share, so is a great buy at $300-$320 USD/share.  He writes:

Because of the market's short-term blindness to this obvious reality, we find it prudent to put a strong-buy rating on the stock if it so happens to trade under $300 during a potential brutal summer correction.

His sentiments are echoed by Horace Dediu at Asymco.



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RE: Pluhleeze
By vision33r on 6/21/2011 10:10:46 AM , Rating: -1
LOL, the stock market is in a correction phase. You're just Apple hating as most people on this site is.

AAPL is up again today which proves you wrong about the fundamentals of the stock, GTFO unless you are a real investor or trader you know nothing about stock valuation.

This article is such a joke only food for techies.


RE: Pluhleeze
By Iaiken on 6/21/2011 11:35:43 AM , Rating: 3
quote:
AAPL is up again today which proves you wrong about the fundamentals of the stock


A single incremental increase does not a trend make. Apple has been trending down at 16% for the last 6 months including the recent spike. While past performance is no indication of future performance, it doesn't take a genius to look at the direction that the tablet/phone markets are headed and realize that Apple has reached an impasse.

The fact that you got so PO'd about someone having a different opinion of Apple stock than you is interesting. There are numerous other better performers on the market than Apple that offer much more sustainable growth year over year.

With Apple's most important business segments either in decline or plateauing in the face of stiff competition, any stock increases are purely speculative ones. Apple has essentially been caught in a trap of it's own making. To make any more headway, they need to move more and more product, but the competition is steadily hedging them out of the market.


"Death Is Very Likely The Single Best Invention Of Life" -- Steve Jobs














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