Is the Shine Off Apple?

By Jonathen Chen

Apple Inc. has lost itself in recent trading days, as the stock never fully recovered from its October earnings report miss, and shares fell well below $400.

At the time of this article, shares of Apple were trading around $376 per share, down almost 3% on the day.

Apple was always thought of as THE infallible stock, a company that could do no wrong. The Cupertino-based company, once led by Steve Jobs, and now Tim Cook, makes products the masses love, and are willing to pay higher prices for. In the past month, shares have lost 10.35%, compared to a 1.43% drop in the NASDAQ over the same time.

Apple was never attacked in the media, for Jobs and the rest of his team could do no wrong. The iPhone, The iPad, Countless variations of the iPod, Macs, etc. Nearly every product the company has come out with in the past 10 years has been a hit. The Apple TV, which Jobs used to call a “hobby,” has some use, should Apple decide to come out with an Apple-branded TV set.

For now though, the shine is off of the company. The iPhone 4S has been selling like hot cakes, and the company, usually notorious for its conservative guidance, actually raised guidance for the all important first quarter. The first quarter is Apple’s busiest, as it coincides with the holiday shopping season.

Apple expects around $37 billion in revenues for the current quarter, and a staggering quarterly earnings of $9.30 per share. The company has never had a quarter with over $30 billion in revenues, much less closer to $40 billion. The iPhone 4S sold out in Hong Kong in the first 10 minutes it was available, and there is still a long wait at Verizon stores, as well as online for the newest version of the popular smartphone.

Despite all of this, the media has attacked the company that once could do no wrong. The luster is coming out of its equity price, despite having returned 16.7% year to date, far outpacing the yearly loss for the NASDAQ. The earnings miss really took a lot of the shine off the company, and Apple will have to prove that it really was the media that caused the miss in iPhone sales during the fourth quarter, and not a lack of demand. With current anecdotal evidence, it appears the media did cause, or at least help cause, the miss in iPhone sales. Apple may have been the reason October retail sales were stronger than expected, according to Goldman Sachs.

Jobs is no longer at the helm, and Cook, an operation genius, is not the visionary, nor the salesman, that Jobs was. Steve Jobs could sell a ketchup popsicle to a woman wearing white gloves. He created devices (iPod, iPad) that the popular mass did not know they needed, and then bought them in droves.

With $81 billion in cash, this should help support the share price from ever going down too far, as Cook has said that he is “not religious” about holding cash, as Jobs was. Apple has never paid a dividend or done a share buyback since Jobs returned to the company in 1997. Under Cook, this may not be as big of an issue.

Still, Apple has a ding on it, and only a return to stronger than expected fundamentals will bring the shine back to Cupertino, California.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalised or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalised advice about your financial situation.

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