Hmm, why would a stock like Apple fall 6% just before quarterly earnings are due?

“I think it may be time once again to dust off Jason Schwarz’ classic blog post: Apple: Seven Reasons Shorts Love It,” Philip Elmer-DeWitt reports for Fortune.

“Apple’s (AAPL) shares, in case you missed it, took a drubbing last week, falling $38.77 (6%) in four days — from Tuesday’s all-time intraday high of $644 to Friday’s close at $605.23,” P.E.D. reports. “To be sure, there was a bit of negative news that could have triggered some selling. The Justice Department’s antitrust division sued Apple and five publishers last Tuesday for collusion in the e-book trade. But that doesn’t really justify knocking $36 billion off Apple’s market cap. Sales of e-books amount to a tiny fraction of a revenue rivulet…”

P.E.D. reports, “This is where Jason Schwarz comes in. I’ll post a summary of his seven reasons below the fold, but the meat of his argument can be summarized in two sentences: ‘If you can keep a good stock down then you are able to load up for the ride back up. It’s like a slingshot — the harder you pull, the more propulsion you generate.'”

Read more in the full article here.

MacDailyNews Take: As we’ve written frequently, as recently as January:

AAPL is like a buoy. Quick, it’s back on the surface! You there, analyst, and you, too, swim down and tug on the chain! Drag it under.. lower, lower… good! Now, quick, everybody jump on, and we’ll take a ride back up to the top again!

Rinse, lather, repeat.

[Thanks to MacDailyNews Reader “JES42” for the heads up.]


    1. As noted above, the DOJ antitrust lawsuit for collusion in the ebook trade would have a minimal impact, even if Apple and the publishers lose the case and have to pay fines. $36B was trimmed from Apple’s market cap while Apple’s total potential liability relative to the case is probably no more than a few hundred million, max. Nice try, but it is not a legitimate reaction to the case, although that undoubtedly helped to push some nervous investors to the sidelines to protect recent gains. The stock market is often illogical and unpredictable, and attempts to justify its behavior in hindsight are largely a waste of time, anyway. Let me know when you can predict the future with any certainty, however, and we can talk…

    2. Unlikely because there are articles saying that Apple has a strong case against the DOJ and could win. I believe it’s a combination of profit-taking and the European economy. The market in general has been weak. It’s good for those that have more money to invest in Apple since the shares will likely run up after earnings. It’s annoying for me to see Apple drop, but the drop is not really all that much.

  1. The reason why the stock will start to dive is because of the dividend. Major slip up on Cook’s part. It will attract the wrong type of investor who will take a payout rather than a risk. Now that Apple will have a election process for board members, well there goes the hard and long effort that Steve Jobs put in place to prevent the wrong people from getting on the board.

    Apple could used that 100 billion and open up their own bank, thus drawing a line of credit of 1 trillion. In turn they could have loan themselves monies to buy back Apple at a very low interest rate and getting a great tax rate reduction every year.

    Cook needs to start showing his worth. I mean the MacBooks are now 4 years old in design. The MacPros WTH is going on there?! The iPods have stalled despite the fact they still sell over 40 million units a year. Where is iWork ’12?! Xsan?! Why is Final Cut and OS X Server declining in support?! Worst yet, and for the first time since Jobs’ departure the new iPad billboards were delayed 1 month after launch. WHAT!? Talk about confusing the message.

    Jobs really had to focus on a couple of things his last year, but I highly doubt it meant to drop focus on the other core elements that make Apple shine.

    Cook what is going on?!

    1. Truth be told, Steve Jobs was an anomaly. I think this monolithic approach for one world leader is old hat. Because Steve Jobs’ life was 100% Apple, and the fact that he spent every waking second to oversee every aspect of Apple, I don’t expect that super human approach from Cook or any other person. It is pretty unrealistic.

      However Apple can use a law firm approach and have partners. Have one person who can focus on that part of Apple. Now you can emulate Steve Jobs’ passion to the fullest without burning the team out.

    2. Clueless! You have no idea what you are talking about. Like your moronic comment about iPods! Since every iPhone is in fact also an iPod, sales have accelerated exponentially. As to the macbook pros, they have gotten regular updates to their core, just not the exterior. I guess the folks at Porsche are idiots as they do the same thing. Go crawl back in your hole.

    1. Maybe. I think it is a lot of people cashing in their AAPL stocks to pay their taxes. Too bad. Cash in anything else and next year the Apple stock will be in the $900 (50% higher). Sell it then if you have to.

      1. +1

        April, always a sell off time to pay those taxes. If they change the capital gain tax, then you’ll see a sell off like none other. As MDN said, it’s getting pulled down and I’m jumping on.

    1. Amen. AAPL can’t keep going up forever. Even fanboys should understand this. Plus earnings is next week so part of this drop is to be expected. And no fanboys, AAPL is not the only stock that gets hammered before earnings. It happens to many stocks. Not a bad idea to take profit before AAPL’s earnings as it generally drops either before or before and after earnings. “Never fall in love with a stock”. That’s the very first rule of investing. And the most important rule!l

      1. You never hesitate to demonstrate that you know nothing about Apple and very little about how the stock market works. I’ve followed AAPL daily for 10 years and made a ton of money. You’re clueless.

        1. Really genius? How so? I doubt that you have made any money on it. Apparently the facts are offensive to you. But they are just that,facts. So I doubt you even follow the market either. Touched a nerve did I fanboy? Too bad. I was able to pick up some nice long calls at the end of the day. Should work out well soon. It’s the stock market genius. You obviously don’t invest or have any knowledge
          of same. Just because you don’t understand something is no reason to make negative comments about someone who does. Ok, prick?

  2. These unexplicable drops do happen some times every year. Some big guys are playing the short game. I’ve gotten used to it and don’t care. If you do own AAPL, better don’t set an automatic stop-loss order and don’t get nervous.

      1. “As the article points out the company’s fundamentals is so strong manipulators like to play games with it as it’s relatively safe.”

        My point exactly. Manipulators-Manipulators-Manipulators.

  3. Last time I looked Max Pain was somewhere around $560. That’s the reason for all the fear mongering and distortions, IMHO. We have to drive the share price down to a level that won’t put the hedge funds out of business. Anybody care to bet that we get there this week?

  4. 2 cents from amateur aapl investor:

    – don’t invest in aapl if you are nervous. Aapl is a volatile stock. As the article points out the company’s fundamentals is so strong manipulators like to play games with it as it’s relatively safe.

    – for a stock that has risen hundreds of % the last few years, 5% up or down is relatively benign. Another stock for example that only grows say 5% a year, a 5% drop is massive.
    And as the other commentator pointed out be careful with your stop-loss instructions. Panicked selling allows the manipulators to pick up.

    – don’t invest in aapl or other tech stocks if you don’t understand tech. Normal technical analysis, stock fundamentals etc can only tell you so much for tech just like pharmaceutical stocks.

    For example if a drug company just got a FDA approved cure for cancer even if the the ‘income growth’ ‘P.E ratio’ ‘past history’ etc of the stock is not the greatest it matters little as the company is going to shoot up. So to invest in pharmaceuticals is ‘do you understand drugs and healthcare’ . LIkewise only invest in aapl if you understand tech. Fundamentals is important but perhaps only 50% of the picture. RIM had good balance sheets etc the last few years but tech savvy people knew it was headed towards a cliff as building a new OS is not easy.

    ( when iPhone Android came out did you expect iOS to clean up and take 80% of the profits? years ago many tech savvy people already knew Android was headed towards malware, fragmentation and with dog fighting OEMs : low profits. I listened and evaluated what they had to say and stopped buying Goog and poured my spare cash into aapl. Aapl has gone up from around 90 to 600 while goog has stayed flat. I made several hundred thousand profit. ).

    – appl can go up and down also because of nothing directly related to it.
    For example recession and the fact that a lot of appal is held by funds in ‘baskets’ with other tech stocks. RIM going down can also pull appl down as well.

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