What is wrong with Apple’s stock?

“Apple stock has fallen from $705 to as low as $632 in the last two weeks, which makes it very attractive from a valuation perspective. The old adage ‘Buy Low Sell High’ applies here but it feels like when it comes to Apple, investors lose confidence in the stock when it begins to fall,” Darcy Travlos reports for Forbes.

MacDailyNews Take: Thank heavens for that!

“Conventional wisdom would say, if you like a stock at one price and the fundamental remain in tact, then you are really going to like it 10% lower,” Travlos reports. “What is wrong with Apple right now?”

“Investors are worried about iPhone5 sales. First, the concern was that Apple only sold 5 million on the first weekend. But, 5 million was a blow out by any criteria,” Travlos reports. “Second, the concern has become that issues at Apple’s manufacturer and assembler, Foxconn, suggest that Apple will be limited in its ability to supply iPhone5s in the December quarter. It is a legitimate concern that supply could be limited in the December quarter, but, remember, we are only eleven days into the December quarter and Apple has a strong track record of consumers waiting until they can get the products they want. Every quarter that the market dings Apple for consumers waiting for the product until the next quarter, Apple produces a monster subsequent quarter.”

Travlos writes, “Look at the long-term price chart of Apple in context of other periods when noise in the market shook investor confidence and see that Apple continues to push through these periods. At $630, Apple trades at less than 10x FY’13 earnings (excluding cash), is growing conservatively at 20%, and has $117B in cash and investments on its balance sheet. Apple remains a better buy today at $630 than it did two weeks ago, certainly. Invest for the long term.”

Read more in the full article here.

53 Comments

      1. Apple is a one trick pony in the eyes of many investors and should the iPhone stumble the price will tank.

        At some point Apple will run into the same problem Microsoft did with Windows- the inventory of stuff already in customer’s hands is enough for their needs and competes with the desire for the latest and greatest.

        1. Really? A one trick pony – Surly you are not referring to the iPhone which became a whole new category for Apple – they still sell a lot of computers and iPads and for every iPhone they sell they just keep making money. The freight train has just started. Name another company that is doing as good as Apple is doing? This is just another ploy by the hedge fund people the drive the stock down so they can ride it up again. There should be a law against that.

        2. I agree that at some point iPhones/iPads will be “good enough” and start to over serve their customers. But, I don’t see that happening any time soon. I believe the iPhone 5 is great and all, but there is still a lot of improvements to be made on mobile devices.

          Desktop (and to a lesser extent, laptops) have become pretty good over the decades. I can use a 2, 3, maybe even 4 year old computer and not notice a large difference in experience performance many tasks. We are *many* years away from that being the case with mobile devices.

          I believe Apple has at least a few more years before the iPhone becomes “good enough” to where people don’t want to upgrade their phone after 2 years.

          And iPad sales are growing faster than the iPhone ever did. We all know how huge the iPhone market is right now. The iPad market will be just as large in a couple years. (Although the iPad doesn’t have the same profit margins the iPhone enjoys right now.)

          And all of that growth is assuming Apple doesn’t come out with something new in the next few years.

          Anyway, I will be here on MDN. Hit me up in 1, 2, even 3 years. I would love to know how your investments have performed in that period. And I’ll tell you how my AAPL stock has done. 😉

          1. I have an iPad 3 and and iPhone (5) and for all the hoopla, I couldn’t see any great value between the current and last generation as I use them.

            I actually made a little buying a 5 as my unlocked 4 was in pristine shape and Amazon took it for $230- the new iPhone was $199. I knew the 4 would only depreciate, so I took the money and ran. That- not any features- directed my purchase.

            My Wi-Fi iPad was already running 4G LTE on hotspots (one AT&T and one Verizon) so, basically I was buying a warranty by selling the old one.

            The only Apple product I am waiting for is a Mac Pro as my 2.66 Quad Core Xeon/ 24″ LED Cinema is getting long in the tooth. If Apple keeps dragging it’s feet I may investigate a Hackintosh.

            If Apple were smart they would license the Mac OS out to a handful of high end specialty makers for the workstation market and concentrate on the consumer market. I’m sure many will howl, but Apple could limit the license to Xeon processor CPUs and let someone else take care of the Pro market.

            1. There is a lot of profit-taking especially by the big boys right now. Supposedly a lot of that money is going into Google. Google has been having a better run than Apple so I don’t know that’s where I would put my money if I pulled out of Apple. Which I am not going to do. Should be a iPad mini news event tomorrow which hopefully will help the stock price. Supposedly journalists will get an invitation to an Apple event. It will not name the iPad mini but that’s what it will be supposedly. Let’s hope that’s true. Stock needs some help i and some good PR. The October 25 earnings call could be scary. The street may have projections higher than Apple realized. Even though Apple sells a boat load of stuff it may not be enough for the fourth quarter earnings estimates by the street? Be careful there. But you do want to be in after the 25th because the first quarter should be great. And when they report the first quarter earnings in January………. Bam! You want to be there to make money on that. That should be a blowout quarter especially with the iPad mini sales added. C’mon mini!

        3. That one trick pony is worth more than all of Microsoft’s businesses combined. And seeing you other post, your sure have plenty other Apple products to play with. Oh, I tried the hackintosh route, way too much trouble with drivers for me to bother so I sold it. If you are a geek and like, no love, to tinker, then it might work for you. I needed to get work done and some pro apps don’t play well.

        1. It might just be me but taking advice from someone like yourself, with obviously a 3rd grade education, doesn’t strike as sound financial advice. Please stick to things you can actually understand like Lego’s or Power Rangers.

          1. Oh look, brainless pigs are back attacking Indians.
            If you hate Indians, Chinese, South Koreans, then why don’t you guys build iphones and other stuff in your own country????? I know You can’t because you are brainless. 😉

            1. He didn’t say anything at all about any other person besides you. Have you appointed yourself as the representative for several billion people?

              -jcr

            2. Are you new here? Don’t you know what these brainless pigs talk about???? Attack on one Indian is like an attack on all Indians.
              iphone fans, did you read that news about apple/Samsung lawsuit????? LOL 🙂

  1. A wonderful $400.00 stock that pays out quarterly dividend is the future of this stock. It will run up one more time post the Apple buy back that is planned and then evolution will see the stock recess to the $400-$450 mark. Too many new devices in to short of time will stall consumer appetite to part with their money as quickly as they have when new Apple products were (according to Apple) revolutionary. To me revolutionary inventions do not include product evolution.

  2. My girlfriend owns a lot of Apple stock. She sold a bit at the beginning of the week. Her thinking was that she’s made a ton of money on Apple and it’s good to take some of that money out even if there’s the belief that Apple is in a valley of an overall sharp increase in price.

    Right now, there is FUD regarding a few things in terms of Apple. One of which is that the rumors of the iPad Mini aren’t materializing into fact (yet), but there was strong speculation that Apple would announce this week and they didn’t.

    Likewise the Apple HDTV certainly seems to be losing steam in the rumor mill.

    As far as the iPhone 5, the greatest fear is that while Apple is sold out with 3-4 week wait times, it’s unknown how much is actually moving. Production problems could mean light demand still is resulting in long ship times.

    I’m not saying any of this is the case, but that there is a fear amongst investors that bad news could come and it’s easy enough to sell a bit to cover that risk even while believing in Apple long term.

    Like my girlfriend, I’m sure others are seeing it as a good time to take a bit of their Apple holdings and buy something like a new house while still keeping in a large enough chunk to earn on the upside.

    Of course with a PE ratio under 15… yes, friggin’ under 15, it’s one hell of a major buying opportunity right now.

    1. The big money has been made on Apple. Back when Apple’s G3 & G4 were the order of the day one could buy Apple stock for +/- $10 ($5 split adjusted)

      Look at buying 100 shares in 2001 vs today.

      2001 Investment ($1,000 invested)
      100 shares of Apple @ $10 = $1,000
      Split 2 for 1 @ 90 = $9,000 (+ $8,000)
      200 shares @ $628.10 = $125,620 (+ $124,620)

      October 2012 Investment ($125,620 invested)
      200 shares of Apple @ $628.10 = $125,620
      200 shares of Apple @ $800 = $160,000 (+34,380)
      200 shares of Apple if it falls to $400 = $80,000 (-$45,620)

      I bought my first shares in 2001 and accumulated into the low $300s. Sold off some at $404/share and kept the rest. Don’t regret the investment or the sale.

      Apple has been puffed up as every fund had used Apple to offset losses or crap performance elsewhere. When Apple falls, it’s going to fall hard.

      My only regret is not having bought more back when it was cheap.

      1. Your comparison is really silly.

        It would make sense if you invested the same amount of cash each year, either $1,000 both in 2001 and 2012 or $125,620 in 2001 and 2012.

        Otherwise you could make the argument that a Billion dollars in Apple has a downside of half a Billion dollars whereas $100 has only a $50 downside if the stock drops to 50% of where it is today.

        You’re getting caught up in the though of buying shares and share price, as opposed to putting $X dollars in Apple.

        And as for your first comment, when Apple is trading under a PE of 15, the last thing you can say is that it’s over-priced long term. The second to the last thing you could say is, “Apple has been puffed up”. These things just aren’t true as the numbers clearly show.

        1. I personally started buying in 2001 and stopped in the 320’s or thereabout. The point is that the huge multiple gains have already been made.

          Another point is that in 2001, much of Apple’s stock was held by individual investors and today it mostly institutional investors. Should they decide to dump stock the downdraft will be significant.

          1. “the huge multiple gains have already been made”

            Like Randolph said below, that’s what AAPL bears like you have been saying for years. I have made a killing on AAPL by ignoring all that noise and following the fundamentals of the company. You go right ahead and short AAPL. Let us know in 6-12 months how that works out for you. 😉

          2. “The point is that the huge multiple gains have already been made.”

            Well then, say that. When you say things like “it’s over-priced” or “it’s been puffed up”, you’re using terms that clearly don’t apply. When you use faulty math that incorrectly shows increased loss potential, you’re just failing to show something else entirely.

            “Another point is that in 2001, much of Apple’s stock was held by individual investors and today it mostly institutional investors.”

            For a variety of reasons, the stock is more *attractive* today to institutional investors. This has a positive impact on the stock.

            “Should they decide to dump stock the downdraft will be significant.”

            And should they decide to buy the updraft will be significant. You’re stating a hypothetical as a variable. That’s like saying, “if Apple files for chapter 11 next quarter, the impact on the stock would be significant”. Yes, but that’s also not a variable to consider in things that are impacting the stock. In 2001, if individuals decided to dump the stock, it would have the same impact as institutions today. The only difference is that the decision would be broken down to more individual decisions, but the reasons for those decisions are the actual variables.

      2. The big money has been made on Apple.

        Yeah, that’s what I heard when it broke $50. I heard it again at $100, $300, $500, and $600. I’m buying all the AAPL shares I can.

        -jcr

        1. At yesterday’s closing of $628.10 the stock would have to reach almost $79,000/share to give the same return.

          There is money to be made, but not on the scale of those who bought in the early 2000’s. That ship sailed long ago.

          1. @Agent – So, you’re saying we’re not going to see 1000%+ gains in the stock over the next 10 years. Of course we won’t. That would be ridiculous for a company the size of Apple. No one here is saying we’re going to see that kind of upside in our investments.

            But, is Apple going to be up 10% YoY for the next 1,2, 3, maybe more years? Absolutely. Will it be up 20%+ YoY? Extremely likely. If I were to invest my money in a mutual fund or index fund, would it return what AAPL is very likely to return? Probably not. Comparing the likely upsides and likely downsides of different investment options out there, AAPL is the best I can come up with.

    1. @Kool Aid NY1 – OK, I get it. In other words, “searching for something on the Internet,” being the meaning of “Google something,” is all that Google is good for.

      They certainly aren’t good for mobile phones, or other things.

      1. Google is an advertising company first and foremost and while they provide an OS to manufacturers, they do not build their own devices. No doubt, the Moto Mobility asset purchase might well change this but for now all is good and Googling onward and upwards!

  3. I’ve shared some reasons why Apple customers and investors have been disappointed in the last year or so, but unfortunately there are a few potty-mouths on these forums who didn’t want to hear anything bad about the home team. These few narrow-minded individuals do not welcome constructive criticism and pointing out clear issues with Apples’ strategy or execution. They predict endless record growth and assume all Apple decisions are perfect.

    Hubris, though, leads to complacency or worse. Ask ANY corporation that has grown as big as Apple is today.

    Long-term trends in stock price usually have a way of indicating when things are going in the right direction, though.

    1. I certainly haven’t been disappointed as an AAPL investor over the last year. Why would I be?

      I certainly don’t predict endless growth, but I don’t think we have reached the peak yet. This pull back in temporary.

      1. I agree, Gordon, Apple stock has much greater upside for quite a while. Let’s just hope Apple doesn’t wait too long between releases of much-rumored “game changers”.

        But as always, I urge Apple fans to be vigilant and speak up when Apple leaders commit some of the mistakes that took Microsoft down to its current pathetic status. It can happen to Apple. Hell, Apple almost died before due to self-inflicted wounds.

  4. People, what you’re seeing is totally GLOBAL economic effects here. I don’t know if you’ve noticed, but it’s not JUST AAPL which is down. The world is going to “Hell in a handbasket” and it’s taking everyone down with it. Assuming the whole Euro thing recovers, expect Apple’s stock to go through the roof…

  5. “I bought my first shares in 2001 and accumulated into the low $300s. Sold off some at $404/share and kept the rest. Don’t regret the investment or the sale.”

    I have almost 6000 shares of AAPL, average price $12.41 each. Over the past 25+ years, people like you have predicted the end of Apple’s meteoric rise hundreds of times, literally, and told me to sell at every hundred mark because the stock just COULD NOT rise any higher. Right? Now, you bought in at 300, sold some at 400 and proclaim yourself a genius, a financial guru. Wow. Your mother must be so proud, for you have left (at least) $230 per share on the table, thanks to your pride and incomparable financial acumen.

    Brother (or sister), I trust you are not a broker or financial consultant, for your advice is not worth sh*t. Given my personal holdings, I would track you down and take my lost $1.4 million out of your ignorant hide.

  6. what’s wrong? it’s inevitable. apple made its price own way due to all stupid lawsuit, wage, wealth in factory, low expectation of new products, and no innovation. apple stock has been so much bubble. now, it is started to reduce all of bullshit. but it will even fall down this year. I think that iPad mini won’t recover it back. ipad mini is the biggest decision ever made. it doesn’t have any merit to buy in terms of hardware spec, and price point. how can apple persuade us to sell it? recently, Samsung won appeal against Apple. I think that apple is done. no more glory.

  7. As a group, stock investors are basically addicted to playing headgames with themselves. Unfortunately, there are so many investors that their stupid headgames can affect share prices. Anyone who is disappointed because Apple “only” sold 5 million iPhone 5’s the first weekend has lost touch with reality. Their brains are being eaten by greed.

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