Apple crashes into bear market: Poof! $150 billion up in smoke

“Apple diehards who keep saying the stock ‘will come back’ are going into hibernation today,” Matt Krantz reports for USA Today.

“Shares of the gadget maker Friday are down another 1.3% Friday to $107.61 – knocking the stock down 20% from its recent high of $134.54,” Krantz reports. “The breathtaking decline not only puts Apple into a bear market – defined by a 20% drop – but has obliterated a staggering $150 billion in shareholder wealth from the top.”

“Just to put that into perspective, Apple’s $150 billion decline is larger than 475 companies in the Standard & Poor’s 500 are worth,” Krantz reports. “A drop this big is the financial equivalent of wiping out the market value of entire companies like Pepsico at $145 billion, International Business Machines at $133 billion and Nike at $111 billion.”

Read more in the full article here.

MacDailyNews Take: Those year-end commission-generating actionable notes certainly created some action.

Delousing the shareholder pool of reactionary ignoramuses isn’t necessarily a bad thing in the long run.

The calls from the brokers to their clients would be something along the following lines:

• To a client that is already long the broker would say, “our analyst just found out some information not yet out on the Street and he says shares will remain weak for weeks and quarters and you should sell your shares in Apple and buy XYZ instead.”
• To a client that has no position in Apple, the broker would say, “our analyst just made a great call on Apple and the shares are down around $3 per share and I know you have wanted to buy Apple and here is your opportunity. He still has an Outperform on the stock with a $140 price target.”

So, what the analyst did here is come out with a negative note that will get the shares moving, in this case lower (matters not actually) and allow the brokers to call their clients and ask them to buy/add/sell as the case may be.

It’s called an “actionable” research report in the business. — Jay Somaney, Forbes, November 10, 2015

SEE ALSO:
RBC cuts Apple price target to $140, citing iPhone supply chain concerns – December 17, 2015
Piper Jaffray: Individual component suppliers are not indicative of the health of Apple’s overall iPhone business – December 16, 2015
Apple stock slumps on Dialog Semi warning – December 15, 2015
Analysts baselessly warning of ‘Peak iPhone’ allow Apple to buy back even more outstanding shares – December 15, 2015
Apple suppliers hit by Morgan Stanley’s iPhone sales forecast – December 15, 2015
Some analysts see Apple iPhone sales seen turning negative in 2016 – December 14, 2015
Cramer: Apple shares may not have momentum but they’re cheap – December 14, 2015
Morgan Stanley slashes Apple price target by 12%; shares fall in pre-market trading – December 14, 2015
Apple stock slides on Credit Suisse claims of iPhone component order cuts, weak iPhone 6s demand – December 2, 2015
UBS analyst’s latest ‘research’ note on Apple is just another ‘actionable’ note and should be totally ignored – November 16, 2015
Apple shares continue to get slammed on commission/bonus related ‘actionable research’ – November 10, 2015
Apple lower after Credit Suisse notes substantial supply-chain cuts – November 10, 2015

45 Comments

  1. Unfortunately, this is a sign that the Tim Cook era of laziness and gross incompetence in regard to cheif executive management, company wide political positioning, product updating, product development, and product launching must come to an end!

    The sooner the board and the international Apple support community comes to the realization that Tim Cook had failed and is currently failing a once great technology company, the better off Apple will be and the sooner we can all move forward and far away from this dreadful time in Apple history!

      1. Keep drinking the Koolaid – the stock is headed sub 100 – unfortunately this stock is simply economics, more sellers than buyers – the big money is getting out and they’ll pound this stock into the ground !!

    1. Sign of the Times?? Stock prices, at least in modern times, are only vaguely reflective of a company’s core strengths and future opportunities. Instead, they reflect whispers and speculation and, far too often, fabrication stemming from a greedy industry where money grows from money and those in power enrich themselves regardless of the fates of millions of individual investors. We are the sheep and they are the ones doing the fleecing..

  2. The sooner Apple goes private, the sooner Wall Street crooks and arm chair CEO experts can find other things to amuse themselves with. What is happening to AAPL is outside of Cook and Apple – it is called the ‘market casino’.

    1. Disagree completely – why then is Wall Street not manipulating other growth stocks – think about it ??

      FYI -I hold several thousand shares on Apple and have been extremely disappointed and frustrated with the YTD stock performance

      1. Wall Street manipulate every stock that meets their criteria. If it has high volume and a large percentage of mum & dad shareholders it will be on their list. Apple is the favourite because of its very high appeal to the mum’s and dads and because it is very large and has high liquidity.

        For brokers and hedge funds to make money the stock market should be as volatile as possible. In any major stock you will see this at work by noting the “algo” levels. Algorithmic trading results in floors and ceilings where the market makers buy and sell. These fluctuate but can be clearly seen on a weekly or daily chart.

        In addition, market makers will drive a stock price down as far as they can, making money on put transactions as they go. When it becomes too difficult to drive the stock down any further, they switch to buying, moving the stock up level by level, buying and selling at each algo level (usually defined by the ATR – the average range of the stock). So the stock goes up, but it does so in stages, allowing the market makers to buy/sell/buy/sell all the way back up.

        The reasons Apple is down are partly due to this manipulation; partly due to brokers persuading mum and dad clients to buy and sell as frequently as possible but also because Apple is now very reliant on one product – iPhone. As this is still a relatively new market it is not well understood, so the impact on Apple of general smartphone market saturation is not known. Further, Apple is very exposed to China which is not a very open market, and subject to direct manipulation by the Chinese government, so somewhat unpredictable.

        Pressure on the stock price also comes from declining iPad sales and the slow take up of the Watch. Android market share is increasing overall and this has reduced apple’s advantage in apps and monetisation (android users still spend less, but the gap has narrowed significantly).

        Apple is also very secretive and this increases the jitteriness of market makers, who prefer to have a good picture, well out into the future.

        This price decline represent an opportunity for shareholders to add to their holdings – by any measure the stock is cheap at this price. Brokers and hedge funds know that mum and dad shareholders panic easily – this generates transactions and therefore income.

        One final factor is the low dividend yield. If Apple had increased the dividend rather than buying back stock the mum and dad voters would be more inclined to hold on. However, the buyback so reduce the shares outstanding and will likely cause share prices to rise higher when the trend reverses. This approach seems to have resulted in a more volatile stock so Apple may change their policy at some point.

        But it means Apple remains a growth stock and the market is unsure that Apple can achieve a continued high rate of growth now that it is so enormous.

        Apple is 30% or so off its highs. If market sentiment changes the stock may rise quickly back to those levels – if watch sales are disclosed by Apple, instead of being buried (analysts and market makers hate that) and there is substantial growth, then this could be the trigger for a reversal.

        But, right now, all eyes will be on iPhone sales numbers – and will remain focused on iPhone unless, and until, another Apple product or products achieve substantial momentum.

        1. Why is apple penalized for relying heavily on iPhone, when it makes up 60% of revenue, and Google not punished for relying on ad buys which make up over 90% of revenue?

          Your argument only makes sense if you ignore the blatant manipulation of Apple stock compared to others which are not pumped and dumped for the same “reasons”….

          1. Possibly because as long as you use a browser you are likely to see ads vs being a single choice among a sea of other devices. Compared to devices that constantly get updated, ad revenue perhaps seems to be a more stable revenue stream.

            1. As it is perception by stockholders of the future and not actual results that appear to move stocks, I’m not sure Apple not renewing Google as default search engine will mean much. As for revenue, all it means is that those that aren’t choosing their default search engine explicitly will be ‘lost’ to Google. If they feel the results are ‘bad’ they’ll simply set their default back to Google eventually. Since it appears that a good portion of the ‘aware’ set already don’t use Google by choice it may not move the revenue needle as much as you would think.

            2. Not really. Most people just use the default search engine, even most ‘aware’ people. Most people simply never change it. If apple were to replace Google as the default, since almost all of their mobile revenue comes from iOS users, it would put a serious dent into their operating income.
              And as for ads being more stable… What about ad blocking software? Most people are able to use that and willingly want those solutions… Also with Siri and the use of individual apps, most users bypass ads to begin with… Ads aren’t more stable than physical products, especially when that physical product collects more than 93% of the profits in the industry. Even if iPhone were to decline in overall sales, it would still take the vast majority of profits thus being a stable market force due to profit share….
              Basically, as I said before, the ‘reasons’ used to devalue Apple stock are specious because the same metrics are not applied to other companies, which makes no sense….
              It seems the more profitable, stable, and cash rich apple becomes, the more they are either feared or played with to make them ‘come back to the pack’ and perform lien other businesses.
              As an investor though? I prefer strong fundamentals, and solid balance sheet, and a hoard of cash with very little debt to ‘future projections’ which are nebulous and offer no real monetary value….
              Why a company such as Amazon or Twitter can continually lose money every quarter and still be considered a ‘growth’ stock is completely asinine….

            3. You’re right about Siri and ad blocking software possibly reducing Google’s ad revenue.. I had not considered that. Doesn’t that also mean though that those same factors already affect Google currently and will as a result in less of a revenue drop from Apple not renewing Google search as default?

              I agree it is unfortunate that AAPL is being manipulated so much. But as an investor also I am considering that the further AAPL falls, the closer AAPL is to using its stockpiled funds to buy back all shares and go private. This is an option not available to most other companies.

            4. I agree with you that buying back as many shares as possible is a good thing, but I’m not so sure going private would be the best course of action. Just reduce the volume enough so the institutional investors can’t screw with it as much. And, not since ad blocking software just became available in iOS 9 and is only available on 64bit iOS devices, it hasn’t had a huge impact yet, but it will very soon. It’s the apps the bypass most of the ads, at least in paid apps, and that hasn’t been factored into googles calculus at all. If their revenue drops, or changes, it’s simply stated as an abberation rather than the sky is falling rhetoric focused on apple for every small innocuous untrue rumors….

    2. tincan, Apple is not “going private.” A corporation cannot take itself private. It would take a huge amount of *external* resources to attempt to buy out Apple and take it private. I am not sure of Apple’s current market cap, but take that figure and add a premium of 30% to 40% and you might be in the ballpark — I am guessing something in the range of one trillion dollars or so.

      This would require wealth on a massive scale combined with quite a bit of borrowing. Such an event seems unlikely to the point of absurdity.

  3. Go Apple inc. buyback team; a drop that they must have prepared for, to retire a record number of shares, to the benefit of long term shareholders.

    I am also sure that long term shareholders will be adding more AAPL shares to their portfolio.

    Thank you to the Santa analysts for issuing their “bearish nonsense”, because whichever Apple Store you visit, they have been heaving over the whole of 2015, with a final push over the coming days to make sure Apple inc. once again delivers a stellar feastive quarter, the likes of which every other company on this planet earth can only secretly admire!

    1. Not in my house! Never going to happen! I will see what HomeKit has to offer as it takes root, much as CarPlay is finally making its way into mainstream vehicles.

      Having “connected” appliances from a piece of shite company like Samsung is not appealing to me. Plus, who knows what kind of security nightmare your Samsung crap is creating?! No thanks!

  4. All that cash back in the streets for Christmas…

    Guess what?

    Its shopping time.

    People are gonna buy Apple products with it…

    The loop is on!

    Watch the next financial results…

    1. Are you kidding me? More than half the population invests in the stock market. Probably a majority of these people own AAPL. AAPL just crashed for the second second time this year and the management is mute. I imagine many will be going to plan B and either purchasing crap for the Holiday and/or returning higher-end items.

  5. The MDN take is classic.

    Apple’s stock is tanking because the bear market will always go after consumer goods first. The price of Apple’s stock has nothing to do with the performance of the company. There is volatility in markets that are not of Apple’s making. This never the less affects the price of the stock.

    Whether you’re long or short doesn’t matter.

  6. As a side note, I haven’t seen Google this close to AAPL for ages – or even in the same “starting hundred” (590 billion vs. 510 billion)

    Google might pass Apple as the most valuable company very soon if this continues, how come GOOG is always Wall Streets number one pet? So it seems anyhow:(

    1. Agreed.. I think the closest I’d seen the market caps between AAPL and GOOG till today was a bit over $80B.. Bloomberg’s market cap numbers today were $591.2B (AAPL) and $514.1B (GOOG) a difference of $77.1B.

      Perhaps one reason is GOOG seems to be involved in a broader range of areas (e.g. Medical HW/SW, Broadband advancement, robotics, self driving cars) vs AAPL that focuses only on tech it uses itself or in its products.

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