Apple’s stock has been crushed the last two days, falling to $427, down from a recent high of $460.
Nobody really seems to have a solid reason for what’s going on here. The stock just started breaking down and people started throwing out ideas.
One of the ideas thrown out by Credit Suisse and Fortune’s Philip Elmer-DeWitt is that the stock broke down after David Trainer, a “little know Nashville trader,” per Elmer-DeWitt, went on a media blitz claiming that Apple is only worth $240 a share.
Elmer-DeWitt says he read through Trainer’s analysis, but concluded, ” I couldn’t make any sense of it.”
Trainer’s entire call is based on valuation of “Return on invested capital,” or ROIC. He says Apple has an ROIC of 271%, which is unsustainable. Microsoft has a ROIC of 75%. Google has 34%.
Trainer says that if Apple can get an ROIC like Microsoft, then the stock is worth $295. If it goes to Google’s ROIC, then the stock goes to $191. If it goes to 20%, which is “still high” in consumer electronics, then the stock goes to $162.
This all sounds like nonsense to us. Especially since Apple has $145 billion in cash, or $154 per share. We supposed it could burn all that cash, but we doubt it.
Trainer, for what it’s worth, has no position in Apple.
If we had to come up with a real reason Apple’s tanking it would be that 13Fs are coming out. Those are the forms hedge funds file that reveal their trading positions.
A lot of big names have revealed that they’re dumping Apple altogether. This is leading to a lot of copy cats to drop Apple, even though, they’re reacting way too late.
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