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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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Technical correction
By TakinYourPoints on 6/21/2011 7:03:36 PM , Rating: 1
The main reason for the correction appears to be technical, as the stock price has retraced to the 200 period moving average on multiple time frames. This may be a good point to add shares. If you are afraid at this price, then don't buy, but don't be surprised if it bounces from this level either.

And if it does break below the 200 and the broad markets also sell off, wait for the stock to hit around 235-250, there is major price support at that level. Either way, this is the first time AAPL has hit the 200 moving average since August of last year when the stock was at around 235.

As for people claiming that the stock is overvalued, I strongly disagree, the PE ratio has declined steadily over the past six months as their earnings have continued to skyrocket:

Again, it may be an opportunity to buy at this technical support level. I personally have very little worry as I sold a good chunk of my shares at 350 on June 1st. If this thing does break down, and that's a serious gamble right now because shorts are probably about to get creamed after the last two months of broad declines, then I'll be ready to buy more shares further down. I may nibble at a little more now, we'll see.

RE: Technical correction
By vision33r on 6/21/11, Rating: 0
RE: Technical correction
By TakinYourPoints on 6/21/2011 11:46:17 PM , Rating: 2
I'm mostly a technical trader. The rest is 99% hype and sensationalism.

You ever notice how "news" is spun either way, how a stock responds positively to "negative" news or how it tanks on "positive" news? Yeah, it can be better explained by the charts. In most cases, news is a story that is retroactively fabricated after the move by journalists and amateur bloggers to explain things that they don't really understand.

Understanding charts and the technicals behind them are a much saner way to evaluate risk and entries/exits.

RE: Technical correction
By Pirks on 6/22/2011 12:04:17 AM , Rating: 1
the iPhone must be dying and nobody buying iPads
hey vision33r, here's your words from September 5, 2010 -> "Android sucks for enterprise and iPhone also too. Nobody makes a better enterprise phone than Blackberry." <- are you still standing behind these words? Or did you change your mind?

RE: Technical correction
By Pirks on 6/22/2011 12:30:58 AM , Rating: 1
ah now I see, you're the BB admin for your company, this explains a lot :) you still find BB superior for business but Deutsche Bank Equity Research went from BB to iPhone. why did they do this? any ideas?

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