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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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Apple Apple Everywhere...
By garagetinkerer on 6/21/2011 3:38:31 PM , Rating: 2
Apple's marketshare in PC market is about the same. A majority of their income comes from other sources. As someone earlier mentioned, as long as iPhones and iPads are doing rounds... they'll see a steady stock, which will plummet with the health of one who blamed us holding their phone incorrectly :D

One can hate MS as much as they like, but they are making enough products, targeting enough markets and will remain relevant for a considerable amount of time to come. Gaming is one good reason. Businesses have their reason to use MS. In short... they have a more viable business setup.

Apple is making money selling music (nothing wrong with that), however its been a while since i've seen something really new and good come from their end to this effect. However, the last they came up with something was when they introduced the iPod based on the iPhone.

Software, well they DO sell software, but they are targeting a niche market, with little or no growth.

That leaves PC hardware. I know of a lot of people who buy because it is nice and shiney. Engineers, all of them and shamefully, they're from the country where largest numbers of engineers are made. My country which i love very much, India. O Noes... They bought their machines, but most do not know that the chippery these days is the same as X86. However, in India, we do believe in and respect e-peen and well... and we're multiplying. So Apple has a market there alright.

When it comes to phones, Apple is pissing off the wrong people. Samsung, who makes their chips comes to mind. Apple never had this much competition before and will have ever increasing levels of competition in the coming months/ years.

In short, $300+ stock value is really not indicative of worth of the company. They may have cash in bank, but then there's a little more that you could add on top of that. But really, the most valuable tech company? Steve Jobs is dying from that sick joke you know. That and you holding his phone wrong. :D




"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg














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