Apple: As good as it gets, so why is AAPL stock going down?

“If The Motley Fool allowed for subtitles on articles, I’d have tagged this one ‘Waaah! Why isn’t my Apple (AAPL) stock at $1,000? Everyone said it was a blowout quarter! All the people on CNBC said it was going to $1,500. Waaah!,'” David Forrest writes for The Motley Fool. “Yes, I know, that would be a really long subtitle.”

“Kidding aside, and given how strong the most recent quarter’s numbers were, it’s fair to wonder why the stock is going down and not up,” Forrest writes. “First the stock drops from $644 all the way down to $555 the day of earnings, and then it climbs up to $618, and then it falls right back to Friday’s close of $565. None of it makes sense, right? The stock is so cheap, trading at just 11.5 times next year’s earnings, right?”

There are lots of short-term explanations for why Apple’s stock is going down:
• The broader market is falling.
• It broke its 50-day moving average.
• It had to fill the gap.
• It’s just profit-taking; people have made a ton of money.
• The jobs numbers were terrible, but not bad enough for QE3.
• The law of large numbers will kick in.
• The company provided a conservative outlook for the June quarter.
• Apple has some tough comparisons ahead.
• Sell in May and go away.
• Europe is in turmoil. Sarkozy lost and the pro-bailout Greeks got tossed.

Much more, and many more bullet points, in the full article here.

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

14 Comments

  1. Call them the effin fool from here. I bet they like the valuation on amazon as. Well. There is absolutely no reason AAPL is trading at these multiples. Law of large numbers or not. They have grown at 100% a quarter for the past 2 years!!! Growth just does not stop unless you do not have product to sell.

  2. Nothing wrong with the stock going down, but why is it going down as far as it has. I’m sure it isn’t anything serious and probably a very temporary situation. I’m just curious as to why no one knows the exact reason. With all the financial geniuses out there, you’d figure someone could give a decent explanation. Either this is normal for Apple or it isn’t. People that track Apple should know that much.

    Profit-taking seems to be a good reason although it seems that Apple seems to be more of a prime target for such considering that Priceline and Intuitive Surgical have gone up even more than Apple. Why aren’t they being raided as much as Apple? My overall ignorance of the stock market puts too many suspicions in my head. Whenever I don’t understand something I always feel there’s foul play going on which is probably just means I’m paranoid. I’m well ahead with my Apple investment so there’s no reason I should really worry about Apple’s short-term ups and downs.

    1. One explanation is that it’s just random movement. Financial analysts for example often approximate and model a security’s movement as brownian motion in the short term, which happens to be the same movement that describes the movement of molecules in a closed space.

      I’m suspicious that the stock is being manipulated, but their volume remains low, which seems like the more important question: why is no one trading aapl? Even if someone were messing with it, it seems like we’d expect to see a higher volume.

      That being said, markets trend towards equilibriums in the long run. The market will tolerate a p/e ratio of 13.8 on a cash rich, debt free company with solid operations, product line, consumer loyalty, etc for only so long before the market has to correct upwards.

    2. AAPL isn’t going down, it should have been in the range 550-600 all along, after being held down more dan a year. Its normal upward trend is 55%/year, and this trend didn’t realize in 2011. The recent rally to over 600 is just the long awaited correction, with some overshoot, as rallies always do.

      Just look at the upward slopes in 2011. They get steeper and steeper, meaning that there was an increasing tension between AAPL’s stock price and what it should have been. For some reason it reverses between this upward mode and plain tracking of the NASDAQ (meaning: there is no significant news, only some lingering FUD).

  3. I agree that profit taking is occurring. However, the courts don’t seem to be buying Apple’s patent claims, and the Motorola FRAND case in Germany looks like they’re getting ready to force Apple to pay some exoritant license fees for the standards encumbered patents Motorola owns, basically saying it’s OK to charge Apple more than other companies, just because they can afford it. This is bad news for Apple’s cash hoard. The vultures are licking their chops.

    This uncertainty, the daily FUD hit pieces in the major business papers, and an unwillingness to believe Apple can continue to crank out new technology that consumers will want, all suppress the stock.

    I’m an avid Apple fan, but I’m also seriously concerned that Apple’s board will fall back on traditional quarterly revenues numbers to push the company to meet their financial expectations, vice continuing to let the dreamers take chances on the next great thing. No one could stand up to the company founder as long as what he did worked, even when the success was marginal. Steve saw the company as his personal tool to bring great stuff to the masses, and brooked no bean counters standing in his way. Tim won’t have that flexibility with the board.

    1. “Tim won’t have that flexibility with the board.”

      Respectfully disagree… strongly.

      The board and Tim were all picked by Steve. If the board were to start changing then I might start leaning your way.

      Steve was the one we all saw doing the far-out thinking but it was his strength of conviction that would make a risky proposition a mandated product launch. With $110B in cash, a lot of those risky propositions aren’t so risky anymore. There’s no shortage of people at Apple who see deficiencies in current industry offerings and can think of great ways to fix them. Today’s Apple knows that this is what they are about. The managerial duty of choosing which of those to focuse time, energy and resources on is just as equally performed by Tim as it was by Steve.

      The engineering and innovative culture of Apple hasn’t changed with Steve’s passing and Tim’s role as CEO: Create great products that just work (from a consumer perspective). As long as the product evaluation process continues to stress “it just works” as more critical than “it needs this level of profitability” then Apple will continue to be Apple.

  4. Always read the bottom of the article first: the part that says “Send for our FREE report!” The whole thing is a cheap commercial designed to suck you in to subscribing to something you don’t need, like the whole damn article!

    1. Best post on this. Its not profit taking if you are running a pyramid scheme. LOL Wall street is just creating profit by making things bounce up and down when they are really stable. Its sad really.

  5. It is just crazy. Good thing there is MDN to ground in reality. Maybe it’s because the numbers are off the charts and have the bean counters flabbergasted

  6. None of the above. Most people making investment decisions are mere mortals. They do not have faith that 10+ years of double digit growth can continue. They cannot fathom this kind of success. So they take profits, catching the down waves to buy again and selling at the up waves. Plus, many who have to pay capital gains taxes on their profits sold high, hoping for a downswing and buying low to catch and up to pay the taxes on the capital gain? Maybe? Or, everybody in the market is basically stupid? I dunno.

  7. Hey, stop bitching and make some lemonade. If you truly believe that Apple is as solid as ever, here’s your chance to buy more at a good price. I own it, I’m still way up like most everyone else and will probably buy more. Like this is the first time you’ve seen a boy wonder go bad? Have faith.

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