Apple’s Q214 “earnings provided the catalyst that decisively broke the short-term downtrend and seemingly assisted a gradual turnaround in sentiment,” Dr. Duru writes for Seeking Alpha. “Assuming many institutional investors were caught under-invested in Apple post-earnings, the turnaround in sentiment could provide sufficient buying fuel to propel AAPL above $600 and an eventual rendezvous with its all-time high another 19% away. Recall Morgan Stanley’s earlier claim that Apple’s top 30 institutional holders only held 30% of the company’s stock – a record low and down from the peak of 40% in 2009.”
“If institutional investors do not reload, the 7:1 split planned for holders of stock as of the close of trading on June 2nd will help bring more retail investors into the stock (and likely out of the options trading pits),” Dr. Duru writes. “It is no accident that CEO Tim Cook made purchasing demand the core reason for the split: ‘We are taking this action to make Apple stock more accessible to a larger number of investors.’ The split, of course, does nothing to change the value of the stock or the company, but psychologically, the ability to buy more than 1 or 2 shares means a lot for folks who have just a little to invest.”
Dr. Duru writes, “Overall, the tide seems to be finally turning for AAPL. Improving trader and investor sentiment sits at the core of the recovery story in the shares. Next up, new products to seal the deal?”
Read more in the full article here.
MacDailyNews Take: We look forward to resuming our “all-time high” articles ASAP.
The earnings had absolutely nothing to do with this turnaround. Apple has been performing well throughout the entire “downturn in investor sentiment.”
What changed as of the earnings report was that Apple is throwing money at investors. That’s it. Apple is fundamentally the same company it was before the earnings report. But the dividend increase, the buyback increase, and the stock split are what’s getting things moving again.
And why? Because Apple, after a year and a half, finally caved in and gave Wall Street what it wanted. For better or for worse.
I would say that the significant overachievements in EPS and revenue combined with 43.7M iPhone units in an historically lackluster quarter had a lot to do with the change in sentiment. Many people expected a big downturn after the holiday season and, thus, were pleasantly surprised by the results.
The substantial increase in the stock buy back plan was a welcome surprise that age the stock an upward boost. The dividend increase was also welcome, but it was a moderate increase and anticipated by most. The stock split is primarily psychological – mathematically it has no effect on valuation. But, combined with the increases in the dividend and stock buck back plan, it had a multiplier effect.
Correct me if I’m wrong, but hasn’t Apple reported good numbers almost every quarter for the past year and a half? Wall Street has typically ignored the actual figures Apple announces and gone off its own narrative.
Now, the narrative has changed. And, as such, so has the price of AAPL.
I believe that the fact that Apple is buying their own stock back is almost the only thing that is pushing the price up. Buying pressure moves a stock up and selling pressure moves it down. As soon as Apple stops buying, the price will plummet unless there is sufficient ‘retail public’ buying that will push it higher until they run out of money and then it will drop like a neutron star into a black hole. The public will likely never trust AAPL again and the stock will be as moribund as MSFT.
You are correct about the buybacks moving the stock up. AAPL, just like any other company, has to produce something positive or yes, it will drop like a rock. No company lives very long on yesterday’s news. Not even Apple. Clearly Apple has things waiting in the wings and we will have to wait to see how good they are and how well accepted they are. I’m certain that a larger phone or phones will do well. The iWatch? Who knows? But I believe Apple will come up with something that the public will want.
iPad’s? I’m not sure what they can do there other than the fingerprint sensor. But Apple has a way of surprising us. I still wonder about the 12 inch iPad. Seems like there might be a place for it? But clearly it’s the iTV/AppleTV that could move the needle. If it ever gets here? But I’m happy that my Mac Pros finally arrived. I couldn’t be happier. They are truly remarkable. I don’t see Apple dropping like a neutron star anytime soon. Although I have always understood that AAPL, just like any other stock, has its good times and bad times and if you don’t learn to take profit when you’re way ahead and just plain foolish. But it is nice to see the rabid fan boys downgrading you. I hope they attack you like a pack of wild wolverines. Can’t think of anyone who deserves it more.
I like to believe that the data farms Apple is building are for its entertainment show streaming and / or its search service. TV and advertising are a huge area to make money if Apple can intelligently target ads to individuals based on the user’s own list of products and services that they are interested in.