Apple Investors Return to Senses After Brief Moment of Insane Insanity

Apple’s stock rallied Monday, following a decline that dragged the price down 20 percent from an all-time high in September. By mid morning, Apple shares were trading around $557, up about $30, or 5 percent, from their closing price last Friday.

Driving the rally: A number of analyst reports calling out the slide as unmerited, and touting Apple as undervalued. In a note to clients this morning, Topeka Capital Markets’ Brian White said Apple’s slide is a real head-scratcher.

“The sell-off in Apple’s stock over the past eight weeks has gotten to the point of being ‘insanely insane’ given the depressed valuation, new blockbuster products for the holiday season, the attractive long-term growth opportunities that lie ahead and the company’s ability to distribute significant cash flow to investors,” White wrote. “Those investors that have missed Apple or have been under-weight the stock, now have another opportunity to buy Apple before sentiment takes a turn for the positive during what has historically been the strongest quarter of the year for the stock.”

Given the action today around Apple shares, it seems that quite a few investors have had similar ideas, setting up the company’s stock for the same seasonal pattern it has been following for years. As I wrote this weekend:

“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. … 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 3 percent in January.”