Apple Investors Are Still Wusses
After a meteoric rise, Apple’s stock is falling back to earth.
At market close Friday, Apple’s share price had slipped to a little over $527. This after tumbling to $505.75 Thursday — some 28 percent off its September high of $705. That decline has shaved about $170 billion off the company’s market capitalization, which was headed toward $660 billion just two months ago.
A nasty plunge, and an oddly timed reversal of fortune for high-flying Apple, which is headed into the holiday season with one of its strongest product lineups ever: A new iPhone, iPad, iPad mini, new iPods, and refreshed Mac desktops and portables.
So, what’s behind the slump?
It could be the overall markets, which have taken a vicious beating recently. It could be persistent supply chain issues that have to some extent hamstrung Apple from meeting robust demand for some of its devices — the iPhone 5 is still showing shipping times of two to three weeks on the Apple Store nearly two months after first going on sale; the new iPad mini is also backordered. The iOS Maps debacle and a high-profile management overhaul may have also shaken investor faith in the company.
It could be that concerns over the “fiscal cliff” are weighing heavy on Apple as well. A number of hedge funds that count the company among their top holdings have been unloading some of their Apple shares. As David Greenberg of Greenberg Capital told CNBC, “Someone yelled ‘fire’ in the theater where the hedge funds were safely booking their year-end profits — and as traders do, they will trample you trying to be first to get to the exit.”
Meanwhile, individual investors are too timid at this point to rush in and buy up the stock the funds are selling off.
Another possible factor: Apple is losing its appeal as a growth story as it morphs into a classic blue chip value story, as Bernstein analyst Toni Sacconaghi recently theorized. “We believe that Apple is transitioning from a hyper-growth story to a more traditional, high quality branded company story,” he recently told clients. That’s certainly possible — Apple did pay a quarterly dividend last week.
And then there’s that litany of other concerns — the iPhone market is nearing saturation; innovation at Apple is dying; gross margins are declining; “Tim Cook is no Steve Jobs”; and so on. All can weigh on Apple’s share price.
In truth, it’s probably a combination of all these things — that clichéd “perfect storm” situation that’s so often blamed for volatility like this. With one other important bit factored in.
This pre-holiday decline is a historical pattern. It’s been happening for years. Apple shares slip late in the year amid profit-taking and some irrationality or other. And then the company reports monster first-quarter earnings in January and they spike. It happened this year. And last year. And the year before that. And the year before that as well.
Look at the chart below, which tracks closing prices from the first and last day of December and January. Over the past decade, Apple shares fell an average of more than 1 percent in December back to 2002, and rose an average of more than three percent in January (Note: That average excludes two outliers — an unusual rise in December 2007 and an unusually lousy January from 2008).
See the pattern there? What are the chances the same thing will happen come January?
We’ll just have to wait and see.
Previously: Apple Investors Are Wusses
Arik Hesseldahl contributed to this report.