AAPL: Why did ‘The Most Valuable Company in the World’ drop like a rock?

“Of course, with Japan’s nuclear plants burning and the Dow dropping $242 and change, you would expect Apple (AAPL) to take a hit. So some of its $15.42 drop Wednesday (on top of Tuesday’s $8.13 loss) can be attributed to the rout that drove the whole market down,” Philip Elmer-DeWitt writes for Fortune. “But the Dow only fell 2.04% Wednesday. Apple’s shares had their third worst day ever in dollar terms, falling 4.46% before the market closed and losing another 0.94% in after-hours trading. By the time the high-frequency traders had done their worst, a company whose revenues grew 70.5% last quarter was trading — when you subtract out its massive cash holdings — with a forward P/E ratio in single digits.”

“So forgive me if I place some of the blame for what happened Wednesday on an analyst named Alex Gauna at JMP Securities,” P.E.D. writes. “I never thought much of Gauna’s work — his Q4 2010 predictions were among the worst of 38 Apple analysts Fortune surveyed — but he really distinguished himself Wednesday by downgrading Apple and casting aspersions on its product sales even as customers were still (five days after launch) lining up outside Apple Stores in the early morning hours to buy the latest iPad. Analysts with far better track records than Gauna felt obliged to shoot holes in his two chief arguments for downgrading the stock.”

P.E.D. writes, “But for me, nothing better underscored the shallowness of Gauna’s analysis than the appearance Wednesday of a 100-page report on Apple by a team at Credit Suisse headed by Kulbinder Garcha. Under the headline ‘The Most Valuable Company in the World?’ Credit Suisse set a $500 target — $170 above Wednesday’s closing price — and summarized its findings…”

Read Credit Suisse’s summary in the full article – recommended – here.

MacDailyNews Take: Never look a gift horse in the mouth.

26 Comments

  1. The stock market is a house of cards. It is a speculator’s haven, where value is only minimally considered.

    Companies have value. The trading of stocks has none. When you see this, it all makes sense.

    1. He’ll = hell. Lol. I hate that the iPhone does that …. Kinda. The only time I like it is when I really say “he’ll”. I think I say hell more though. I do love the autocorrect.
      But yea, buy now buy the he’ll out of it. 😉

  2. Marko,

    “Companies have value. The trading of stocks has none.”

    I’m not sure what you mean by this. Yes, companies have value. That value is represented by the shares they issue. Everyone who buys a share has, well, a share of that company. What they do with that share certificate is up to them. And this is where the financial market steps in. In fact, practically ANY open market is a speculator’s haven. When you buy a house, at least part of the reason is speculation that its value would go up, so your investment would be rewarded down the road. When you buy a car, part of the decision which one to buy is which one would hold its re-sale value (again, speculation). It is clear that the stock market often makes moves based on events outside of the core business of underlying companies. However, it is also clear that, for the most part, the underlying companies’ performance determines the value of its stock. Otherwise, Apple would have not become the second most valuable company in the world.

    1. Money managers manipulate the market… Computer trading creates bipolar swings… What does this have to do with the company’s actual value? It is a house cards. And you are correct, it’s not just the stock market.

  3. @ Only You..

    “..Never look a gift horse in the mouth..” means that if the shares have dropped – buy now! ..Or in other words, don’t ask for details – nor look too closely – at this gift ..just act on the info.

  4. Apple will be fine. It will however, be menaced by those that lack the moral compass, intelligence, and due-diligence for thorough fact gathering, analysis, and reporting.

  5. I don’t blame Bat Guano, it was panic selling, pure and simple. Apple has always traded like a stock with a beta of 2 when the market goes down, ie it goes down twice as fast as the market.

    It was painful to watch, but created a buying opportunity. I now have 3000 shares of Apple.

  6. Googling JMP makes fascinating reading.
    They’re nothing more than bookies. They
    don’t care if your ‘bet’ goes up or down
    as long as they collect their vigorish.

  7. Exactly what I thought of anal-ist Gauna down right WRONG!!!! And Apple should have been at the $500 dollar a share 2 years ago if it were any other company like Google for instance. Apple is the most valuable company and yet its share price is lower than Google’s?

  8. The bigger they are, the harder they fall. Apple has been outpacing the market quite dramatically over the past couple of years, so will feel any “correction” harder than most.

  9. not so fast guys…I’d at least wait until the reactors situation looks all clear. It’s the real elephant in the room. Japan is one of the most densely populated countries in the world. Imagine if large swathes became uninhabitable. Or Tokyo received a major dose.

  10. It’s a win win for them.

    Buy stock
    Pump stock up
    Sell stock
    Panic people into selling stock
    Buy stock at a lower price

    The bonus is that brokers get commissions as well but the main money maker is manipulating the stock. For the average joe we have to deal with it. For the brokers, they control the stock price to meet their own needs. It is a given that Apple stock will go up on average so all they need to do it create fluctations so they can make money.

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