Apple goes to crapple in stock plunge kerfaffle: $113bn wiped off in days Apple is in the midst of a stock drop that has caused the Cupertino giant to lose as much as $113bn in market cap. Since posting its last quarterly numbers, Apple (Nasdaq:AAPL) has seen its stock price drop from $125.22 per share to a low point of $112.10. Wary that Apple's meteoric growth from recent years is slowing down as …
Apple is Doomed I tell ye.
To be honest (IMHO) there does not seem to be anything in the Apple Financials that warrants this drop.
I have to wonder if the ban on Shorting Stocks in China has simply moved it to Wall St.
I wonder how much BoA has made by shorting APPL Stock this week? There is nothing more than telling the world that there is a problem where there isn't one to help your bet on a price drop come true.
If we wait for the next quarter's results then we might see some indication of problems in China (or not)
But as is being increasingly being said, 'Apple is Doomed. Sell, Sell, Sell'
"To be honest (IMHO) there does not seem to be anything in the Apple Financials that warrants this drop."
The whole "tech" sector suffers from ridiculous over-valuations. Meanwhile the Chinese are starting to come out with their own products at Western standards and much, much lower prices. A slowdown in China will simply cause them to look for more export markets.
The analogy with Germany and the US in the 19th century is obvious. Britain pioneered a lot of the Industrial Revolution; the Germans and the US learned from it and did better. I think history is repeating itself but with China and India ultimately playing the US/Germany roles. God is dead, but people, except some of those nasty people in Wall Street, haven't heard about it yet.
There was a report within the last few days that the supplier of Apple Watch internals had a low estimate of expected shipments but is surprised not even to have reached the break-even point. Which I think flows into the suspicion that maybe Apple doesn't know what it can do to sustain growth.
It could be true, but still the number of times "supplier slowdown" has been quoted as evidence of Apple falling off the pace, only to turn out to be entirely wrong is not funny. Just look at the litany of The Register's past Peak Apple stories.
Apple have multiple suppliers for most components and frequently favour one or the other depending on their own performance criteria. When a supplier sees orders slump they tend to tell people off the record there has been a slowdown rather than admit they are no longer preferred.
I think more likely cause of concern is the fact the whole of the market for smartphones has slowed down in China due to the current economic conditions. Most people assume that more expensive aspirational luxury priced goods are the first to suffer in a slowdown, but actually, analysts know usually they are more robust than you would expect (aspiration remains a strong force). The fact Apple sales slowed down along with the rest of the market will have set alarm bells ringing as the analysts were just beginning to consider them to be a safe port for when there is a storm. The economic outlook for China remains a bit uncertain at the moment (relatively speaking).
"The whole "tech" sector suffers from ridiculous over-valuations."
This. Apple had the highest market cap in history. Between April 2014 and April 2015, their market cap went from their traditional zone of around $400bn to $700bn. It doesn't matter how cool you think the iPhone 6 is, that is a preposterous jump.
You obviously don't understand the stock market AT ALL to claim that it is based on the "expectation of continued explosive growth". A high price or high market cap doesn't tell you anything about expectation of future growth - it is only when you measure it against profit, which is what the P/E ratio measures, that the stock price/market cap has any meaning in this context.
Apple's P/E ratio is 13, which indicates very modest - even mediocre - future growth expectations. Even Berkshire Hathaway, Warren Buffett's company mostly composed of staid old utilities, railroads and insurance companies has a higher P/E at 17 and therefore higher future growth expectations than Apple!
By contrast Google's P/E is 32 which indicates the expectation of pretty robust growth. Microsoft's is also 32 - yes the market really expects far more future growth from Microsoft than Apple, and the same growth as Google! The only growth I've seen out of Microsoft in the past decade is growth in multi-billion dollar writeoffs from failed acquisitions so I'm not sure what this is based on besides wishful thinking of Microsoft investors (wishing they had sold their Microsoft shares a decade ago and invested in Apple or Google)
For a real laugh, look at Netflix's P/E ratio of 278....sometimes investors are just stupid.
"Apple's P/E ratio is 13, which indicates very modest - even mediocre - future growth expectations."
This is really the point. The market perceives that Apple is a very, very successful company but with few products in very narrow markets, none of which are integrated into a major industry sector in such a way that they would be very hard to replace. If Apple disappeared with all its products tomorrow, there would be some annoyed people but major end user businesses wouldn't fail. Dell, Lenovo, Samsung and so on would simply revise upwards their production plans. If that happened with Microsoft or Oracle, the impact would be extremely severe; there just wouldn't be the skilled people to transition complex systems to alternatives before companies, banks and governments went bust.
Apple may prove everybody wrong by being even more successful in the next few years, but equally it may be a tulip craze or a South Sea Bubble, and clearly the market feels that it needs to hold shares because the company is so big, but that its NPV is not as high as some others because of the short term nature of its product cycle.
(Incidentally, a nitpick - mediocre is more than modest, not the other way round. It might sound negative to call something "mediocre" but a mediocre banker, lawyer or accountant will consider him or herself pretty successful; it means they are in the middle of their professions, not near the bottom.)
"Is that 113bn in Dollars & Cents (paper and metal) or 113bn Dollars in Theoretical Money which doesn't actually exist?"
Not sure where you've been the last several decades or so, but "paper and metal" are naught but tokens of the real money, which is all just numbers on a spreadsheet. The US went off the gold standard in 1971. Since then, all US currency has been nothing more than a representation of confidence in the government. I believe this is true of most countries these days. In the US, when a bank goes to the Federal Reserve for a loan, the Fed just moves some decimals around in the computer.
I think it does show that it doesn't work: the idea is that the stock price of a company should represent the future earnings to be had from those stocks, as assessed by the market. But stock prices flap around like this all the time which really shows that the market is absolutely terrible at that assessment. Economists then stick their fingers in their ears and go 'la la la' because the data is massively inconvenient for their pretty theories.
More accurately, its not $115 billion dollars ... its $115 _potential_ dollars.
In the stock market that's all that counts. Investors don't care how sound a company is, they don't care how much money it makes, they don't care how good/bad/ethical/unethical its products are ...
...the _only_ thing that investors care about is the rate of increase in return (dividends) on their share holding, and the resale price of the shares themselves. If they get a sniff that the rate of growth is about to slow down or god forbid, drop, they'll sell their share investment in order to turn that potential money into actual money. If enough investors do the same thing, it can quickly turn into a feedback loop and drive the company share price down.
This is why modern day companies aren't satisfied with running a stable profit making company - that model only yields a static share price. This is why CEOs are obsessed with the fantasy goal of perpetual growth, to maintain the growth in dividends and share prices.
Even a company like Apple can only sell so many devices, until everyone who is likely to want one actually has one. Then you're in the territory of figuring out ways to get those people to buy _another_ one, and so on to achieve your goal of ever increasing profits...
@Chet Mannly
If it's not gone (as in "no longer exists") then it must have gone somewhere - which is to say it moved. We should find it somewhere else, but we don't. It's just... gone.
Now sure, I get that a thing - any thing - is only "worth" what people are prepared to pay for it, so all we're really saying is that people are prepared to pay less for Apple today than they were yesterday but isn't that a bit... worrying? Especially when we're talking about this sort of money.
It's not a massive deal when you're talking about the little things, but $115bn is a lot. I mean, that's not far off the sort of money that it costs to run the NHS for a year. You could bail out a medium sized bank with that. It'd buy you the worlds second largest navy!
115bn here or there is the sort of money that makes a difference to a national economy and until yesterday there was the expectation that Apple was in some way "Worth" that much more than it is today. When money on that scale vanishes that doesn't just move Apple's share price, that changes things all down the line.
This is what I find disturbing about it. We place so much faith in "The market" and it rather looks like the market isn't very good at it's job - namely determining what things are worth.
I've got a few stocks in various tech-related companies [though, not Apple] and they've pretty much all been dropping over the past few weeks, even the usually buoyant ones like Arm, HP and Nokia. My entire 'portfolio' [for want of a less grandiose sounding word] has dropped about 17% since the end of June.
So it's either "peak every technology company", or the stock market is just doing what it always does: rising and falling in the short term, whilst inexorably moving upwards in the long term.
Perhaps if they stopped trying to turn MBP's into unfixable, throwaway tablets, people would still buy them. Oh, yeah, we know thin is good, but put the *PBF%# ethernet plug back while you're at it. This is the mobile computer that set the tone for the industry; not every device has to look and act like a big phone.
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