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  • More Apple Freak-Outs: The Stock Price

    August 7th, 2015

    So if you’ve put good money into Apple stock, you might be feeling discouraged of late. The price is down, back to the level achieved at the beginning of the year. So it’s understandable that Apple’s critics are busy explaining why the company is in serious trouble. After all, shouldn’t a successful company have a high stock price, one that’s growing by leaps and bounds?

    Well, stock prices, as anyone who has tried to invest will be forced to admit, are mercurial. Even people who claim to be able to make reasoned, profitable guesses about individual stocks or market trends will get things wrong from time to time.

    In theory, you’d think a company’s stock price reflects its current sales, past sales and future prospects. In the real world, it doesn’t always seem to work that way, at least predictably. So just imagine Apple Inc. for the June quarter, reporting record sales and profits. The iPhone is doing great, Macs are doing great, way ahead of the PC industry. True, you can’t say much about the Apple Watch, other than the statements that Apple is pleased but won’t tell you, except in a general way, how many were sold.

    All right, the iPad has seen better days, but the whole future of Apple is not dependent on iPads. It’ll still be a while longer before the product’s potential is known. Perhaps we’ll see this fall, if there’s a full upgrade cycle from folks who bought earlier iPads, and the new multitasking capabilities of iOS 9 may indeed combine to raise sales even further. That in addition to the marketing deal with IBM.

    But none of that has happened yet, so you would wonder why it would impact the stock price now, but everything has gone essentially downwards since the release of Apple’s financials. Clearly investors were unhappy, or were taking advice from analysts who were unhappy.

    So is something wrong with Apple?

    Well, the guidance for the current quarter was said to be conservative, but that’s nothing new for Apple. They usually underestimate actual sales. It’s also expected that new iPhones will debut at the end of this quarter, so there may not be so much time to demonstrate a huge impact. Perhaps sales of current iPhones have slowed somewhat in anticipation of a new model, but that’s pretty typical.

    Some analysts believe that Apple’s revenue is dominated far too much by the iPhone, and if anything slows sales, perhaps saturation of the high end of the market, Apple has to suffer since there’s nothing in readiness to replace it. The Apple Watch, whatever its long-term potential, is still too new to get a handle on how it’ll do this holiday season. Clearly Apple is making the right moves by upgrading the WatchOS with a number of new features that are also said to improve performance. Availability should be pretty decent, and you might even find the one you want at an Apple Store, or some Best Buys and other retailers.

    So there may be possibly logical reasons for Apple’s stock price to suffer, but there’s also the illogical. You see, the price has had its ups and downs over the years. Sometimes it has nothing to do with facts.

    In late 2012, rumors arose that the sales of the iPhone 5 had tanked, based on alleged reports of order cutbacks in the supply chain. Apple continued to report record sales, so where’d that come from? Indeed Tim Cook was quoted as saying you can’t take a single metric from the supply chain and get a handle own how well a product is doing. This is only logical as Apple may vary orders from different suppliers to manage inventory.

    Despite the fact that there was no slowdown in iPhone sales, Apple’s stock price tanked in 2013 before resuming an upward, inexorable climb. Those who sold short, betting on a stock price falling, no doubt earned a pretty penny from the situation. But it all strikes me as suspicious. Apple’s stock price was forced down to enrich some greedy people at the expense of people who had a long-term investment in Apple.

    I wouldn’t presume to guess why the stock price has dropped now. Some companies are betting differently on where it’ll go, suggesting it might fall, or rise somewhat, or rise a lot. No doubt it’s a pretty complicated situation.

    If I were a rich man, I might take some chances, but certainly not on a company’s stock that I write about. It’s an ethnical decision and not just a cash-poor decision.

    Since there’s little or no correlation between the stock price and how Apple is doing on the short-term, it hardly makes sense to assume Apple is in some kind of trouble. The financials demonstrate a highly successful company that continues to excel in smartphones and, at a time when PC sales are dipping, with Macs. Day-to-day stock fluctuations aren’t going to demonstrate much beyond the condition of the overall market on any particular day, or the decisions of financial speculators. Besides, long-term investors in Apple have made plenty of money despite the short-term fluctuations.



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    2 Responses to “More Apple Freak-Outs: The Stock Price”

    1. Dfs says:

      It might help if Wall Street were given some idea of how much revenue is / is going to be generated by Car Play. As far as the Street and the press are concerned, Car Play just as well might not exist, and this may be a serious mistake.

    2. DaveD says:

      Not a fan of Wall Street of today. Stock valuation assessment was more grounded before the dot com bubble. Yes, there were tricks back then with short sales and put/call options. I was just one of many “buy and hold” investors looking for good dividend income. Later moved into mutual funds to broaden my portfolio.

      But, Wall Street has become more so today like a casino with hedge funds, computerized buy/sell programs with the goal of a fast buck. More accurately fast hundred of thousands or a million plus bucks.

      With Apple shares so volatile if I had some extra money to invest, I look to buy when there is a sell off and hold it as long as Apple is making a profit. But I could never wrap my head around Amazon’s lack of sustain profitability. Maybe Apple should adopt Amazon “house of cards” business plan… Oops, just has a face palm moment.

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