Wall Street mayhem delivers undeserved thrashing to AAPL
Reflecting another lousy day for stocks, with the Dow down 372.75 points, Apple’s stock dipped $9.86 to close at $131.05 yesterday -- just $3.22 higher than last week’s low of $127.83.
Although Apple certainly is not alone in getting hammered in the midst of one of Wall Street’s worst crises ever, the company’s demonstrated resistance to the general economic slowdown should have provided some insulation. But not with a stock as notoriously volatile as AAPL.
AAPL already had been on a wild ride this year. After opening 2008 just under $200, the stock tumbled to a low of $119.15 on Feb. 26. By May 15 it had recovered to $189.73, but began to follow the general market slide through most of the summer.
Even so, AAPL stood at $174.67 as recently as Aug. 27.
Despite the prevailing sense of panic on Wall Street, the AAPL selloff makes little sense. The company has reported exceptional sales and profits throughout the year, and is expected to post more eye-popping numbers for the quarter that ends Sept. 30.
Consider: Apple had its best March quarter in company history, with revenue growing 43 percent year-over-year to $7.51 billion. Mac sales were up 51 percent year-over-year.
In the June quarter Apple revenue rose 38 percent year-over-year, led by a 41 percent increase in Mac units shipped. The iPod chipped in with a surprising 12 percent increase in sales year-over-year.
More importantly Apple appears likely to sustain its healthy growth with minimal impact from weakening consumer spending. It defies logic, but that’s what the numbers have been telling us.
Last week the NPD Group-owned DisplaySearch released data showing Mac notebook market share in North America rocketing 60 percent from the second quarter of 2007 to the second quarter of 2008 – from 6.6 percent to 10.6 percent.
As for the Sept. quarter, analysts who follow Apple have predicted yet more record-breaking sales. Last month Mike Abramsky of the Royal Bank of Canada predicted year-over-year Mac sales growth of 44 percent, which would translate to more than 3 million Macs.
Last week Piper Jaffray’s Gene Munster weighed in with slightly lower numbers (unusual, since Munster is typically the most optimistic Apple analyst). Nevertheless, he foresees year-over-year growth in the 30 percent range, with Mac sales hitting somewhere between 2.8 million and 2.9 million.
Though not as impressive as July’s numbers, Mac sales have grown so much over the past two years – 3 million Macs would nearly double the number sold in the September quarter two years ago -- that huge percentage increases will become ever more difficult to achieve.
In any case, Apple can’t help but break July’s record for the most Macs sold in a quarter when it reports earnings next month. I won’t be surprised if iPod sales are relatively flat, given that we just got the product refresh Sept. 9, but booming iPhone sales should more than make up for that. The iPod will make its greatest contribution in the December quarter, as usual.
In the current environment, few companies match Apple’s potential to keep raking in money. Throw in Apple’s lack of debt and staggering $21 billion in cash and you wonder why anyone would sell the stock, particularly as it gets cheaper.
But then again most Wall Street muckety-mucks aren’t looking particularly shrewd these days, are they?
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Comments
Perhaps Apple stock wouldn't be so volatile if it paid out a dividend. The only value of holding APPL is on share price increase, therefore anything that could effect the price will. The only time you can realize the gain is by selling.
Posted by: John | September 23, 2008 9:39 AM
Totally agree. What is Wall Street thinking? Apple is one of the best companies out there, even in terms of conservative growth. That $20B is in the bank for a rainy day, and to pull ahead in times just like these. They continue to move forward (iPod>iPod Touch) and do not stand still. It makes no sense why Wall Street can't see the solid numbers coming out of Cupertino and at least hold the line right now on the stock. But then again, look who's running these companies: they take huge risks with people's life savings and now we are going to bail them out while they take millions in severance packages. We end up losing. The CEOs of MS, LBs, Freddie, Fannie and AIG need to go to jail, and not pass Go.
Posted by: Chuck | September 23, 2008 11:14 AM
The problem with these vulture funds is they are profiting from the shorting - when these vultures short at the being of the day and buy back at the end of the day with a $8.00 difference they made $8 per share and since they deal in thousands they make millions. They don't give a damn as long as they make money.
Posted by: AdamC | September 23, 2008 11:49 AM
Last week's SEC ban on short-selling only covered financial stocks. One wonders how much AAPL would benefit if all short-selling were banned, though that seems very unlikely.
BTW, AAPL has slipped below $130 as I write this.
Posted by: Dave Zeiler | September 23, 2008 1:46 PM
Yeah, the stock market is now below 11K. This is far more serious than most people realize. I have no doubt Apple will weather this storm very well, but I'm not sure the rest of us will.
The dollar is dropping like a rock and not allowing the firms who brought this mess on to suffer the consequences seems horrible to me. Since when was the American public supposed to bail out private enterprise? Is it fair that the investment firms who didn't get themselves into this sub-prime lending mess will see those who did get a free pass? Who's next? The Big Three in Detroit? That's not how the free market is supposed to work. I can't help but feel that we are just making a bad situation worse in the long run.
Posted by: Chuck | September 23, 2008 4:19 PM
Chuck, you hit the nail on the head. Those CEO's are pissing people's lives away. Big salaries and fine stock options whether they help their companies or not. Put some blame on the board of directors for offering these packages. The CEO's base salary should hinge upon the company's performance.
Apple is keeping a good number of people employed by opening stores, but WS loves to reward companies that are doing mass layoffs. The beating Apple's stock is taking lately is rather unsettling. That's why I'm saying that company fundamentals don't count for much. Well, at least not in this market.
Anyway, I'm holding on long-term since 2005, so I'll just have to try to weather through the bad times and hope things turn around.
Posted by: Constable Odo | September 23, 2008 4:39 PM
Things will definitely turn around. Hang in there!
Posted by: Partners in Grime | September 23, 2008 11:12 PM
I'm a long-term hold on AAPL since 1997 and have come to believe that the relatively short-term moves (weeks to a few months) are not ruled by logic, but the long-term trend is. Over the long-term, Apple's share price gets stronger and stronger reflecting the company's ongoing successes. These days I am frowning, but I have confidence that Apple will get back to a fair valuation soon.
Posted by: macFanDave | September 24, 2008 9:35 AM
Thanks for the nice read, keep up the interesting posts…..
Posted by: battery | October 20, 2008 10:35 PM