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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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Fundamentally good
By shompa on 6/22/2011 2:47:54 AM , Rating: 2
Apple has a P/E of 16. They have 70 billion in their bank. With the money they have P/E 9. Apple is a company that last 10 years have an average growth of 49%. The last quarter it was 90% with profits going up 107%

Google has a PE 16, MSTF PE 9, AMAZON PE85, ARM PE100.

If Apples next quarter are in line what they think the PE will be down to 6. This is ridiculous low valuation. You wont find any other tech company that has so low valuation.

What we are seeing in the stock market is a .com two bubble. People throw money at companies that doesn't make money. Like Pandora and it PE 400. SiriusXM PE200.

What Apple needs to do is to split the shares 10-1 and start talking about a successor to Steve Jobs.

You can hate Apple and Steve, but Steve is the most imported CEO in modern history. Apple was worth 3 billion when he took over it. 14 years later it is worth over 300 billion.
This creates real high tech American jobs. Something that is really important for Americas future. Hating Apple and buying Korean telephones is something you should avoid if you like you own country.
Buy American. (and no, I don't mean just Apple. Anything American.)




RE: Fundamentally good
By Pirks on 6/22/2011 3:07:47 AM , Rating: 2
ya when americans start making $800 14" intel culv notebooks that last 14 hours on a single charge like my asian made asus ul80vt - then I start buying american. bye now.


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