backtop


Print 54 comment(s) - last by karimtemple.. on Jul 20 at 10:55 AM


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.



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: Slow news day?
By TakinYourPoints on 6/21/2011 11:39:06 PM , Rating: 2
The reason this is news on certain tech blogs and news sites is because it draws page hits, very simple.

Ignore the sensationalism, look at the charts, and reality paints a different picture. Microsoft and Google have dropped more in the same time frame. Year to date Microsoft has lost about 12% while Google has shed almost 20%. In the same time frame the overall NASDAQ has gained 1%, and since the start of the year AAPL has gained .85%, chopping around in a very narrow range for most of the year. The broad market has been brutalized over the last two months, which accounts for the hits most of these stocks have taken.

As I posted elsewhere here, the drop has been mostly a technical correction. AAPL has consolidated and pulled back to the 200 period moving average for the first time in almost a year. Unless something bad happens, this is a safe range to buy into, and if you want to wait then you can wait and hope for a further pullback to the 235-250 range which looks like major support.

As you said, RIM is the biggest casualty though, down over 50% this year (wow)


"If you mod me down, I will become more insightful than you can possibly imagine." -- Slashdot














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki