back to article Apple share-price-off-a-cliff: Told you that would happen

I was allowed to write this piece because in November I wrote to our glorious editor after a London Quant's Group seminar to say that the price of Apple shares would tank sooner rather than later. As you all know, that’s just what happened - from just shy of $800 to the mid $400s. The reason I don’t make all that much money …

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  1. Steve Davies 3 Silver badge
    Boffin

    Don't blame Apple for the price drop

    Blame those short termist Analysists who gaze into crystal balls and predict a companies earnings for the next quarter.

    From my experience they always go on the high side. So when a company comes in with results less than 1% lower than their predictions the share price tanks.

    Come in 1% over and the share price still drops because the market has already taken the predicted results into consideration.

    There is no fundamental difference between the above and any of those on-line gambing sites that are so heavily advertised on TV these days (but why are they targetting women so much? Are men not as foolish with their money?)

    1. ratfox Silver badge

      Re: Don't blame Apple for the price drop

      Not that it changes the fundamental message of your post, but in this particular case, results have for the overwhelming part of the last ten years been much higher than what the analysts had predicted.

    2. Alfred

      Re: Don't blame Apple for the price drop

      My shares in ARM went up like a house on fire when they came in over their earning prediction.

    3. Ian Yates

      Re: Don't blame Apple for the price drop

      "There is no fundamental difference between the above and any of those on-line gambing sites"

      On an almost related level are the "analysts" who publish annual recommendations on hedge funds. I don't have it in electronic copy, but there was a brilliant article in Private Eye covering the success rate of these hedge fund recommendations in London over the last 5 years and how only one analyst has been able to make suggestions that would have given an investor a positive return.

      1. John Smith 19 Gold badge
        Thumb Up

        Re: Don't blame Apple for the price drop

        "but there was a brilliant article in Private Eye covering the success rate of these hedge fund recommendations in London over the last 5 years and how only one analyst has been able to make suggestions that would have given an investor a positive return"

        Many people don't know Private Eye publishes a city column.

        They should.

    4. Anonymous Coward
      Anonymous Coward

      Re: Don't blame Apple for the price drop

      "from just shy of $800"

      Think the high was actually $702 - not sure that is really 'just shy' ??

      1. TheOtherHobbes

        Re: Don't blame Apple for the price drop

        ""from just shy of $800"

        Think the high was actually $702 - not sure that is really 'just shy' ??"

        That's what happens when you hire quants. (...Spelling that last word very, very carefully.)

        1. Anonymous Coward
          Anonymous Coward

          Re: Don't blame Apple for the price drop

          In recruitment the equivalent is "this candidates current salary is just shy of £50k..." (when in fact it's £40k).

        2. Al Jones

          Re: Don't blame Apple for the price drop

          "from just shy of $800"

          52wk Range: 419.00 - 705.07

          (according to an! extensive! search! that! took! about! 12! seconds!)

        3. Snake

          Re: Don't blame Apple for the price drop

          Ah, yes, the quants. The same fools people who proposed the end of recessions and the great unknown due to their 'stupendous' analytical formulas.

          As you know, those same formulas stated that real estate would always be such a great investment, and keep our economy booming, because no one would ever walk away from their mortgages....

          and that's what you get for listening to "Experts" who play fortune tellers part time.

    5. Anonymous Coward
      Anonymous Coward

      Re: Don't blame Apple for the price drop

      (but why are they targetting women so much? Are men not as foolish with their money?)

      When you say targeting women, do you mean there are attractive women in the adverts? Because I'm pretty sure that's still targeting men.

    6. csumpi
      Stop

      Re: Don't blame Apple for the price drop

      Disagree.

      The reason the stock price is dropping is not because aapl is not making money hand over fist. It's because there's no more innovation*. In the meantime, others have not only caught up, but left aapl in the dust.

      Aapl needs a new wildly successful product to sustain its stock price. They can't keep growing on small upgrades to the iDevices.

      So aapl is largely to blame.

      *aka taking other people's inventions, tweaking them and slapping a designer case around

      1. Field Marshal Von Krakenfart
        FAIL

        Re: Don't blame Apple for the price drop

        The reason the stock price is dropping is not because aapl is not making money hand over fist. It's because there's no more innovation*. In the meantime, others have not only caught up, but left aapl in the dust.

        Certainly crApple have become victims of their own success, for years crApple have innovated, but how far can you constantly create a new product because, as mickeysoft have also found out, there is a threshold above which the incremental improvement in a product line is outweighed by the cost of acquiring the latest shiny thing. The iPhoney was a good logical development of earlier productsinvention, the iPhoney 2 & 3 probably represent significant improvements over the earlier versions, but lest face it, once you have your 8 megapixel pixel camera 64 GB media player internet browser (oh yeah, it makes phone calls as well), where do go from there?

        Large amounts of cash are also a bad thing for a company that develops and improves previous products innovates. Unless you are a cash rich company like Coca-Cola, where innovation consists of bottling london tap water and adding some poisonous chemicals, excessive cash is a liability.

        Cash or cash equivalent securities are a safe commodity, unless you have it on deposit in a Cypriot bank (add French, Spanish and Italian bank to that list), but safe also means low rate of return on investment. Speculators Investors don't like low rates of return.

        An excess of cash over that required for working capital represents unused capital (see above), it should be invested to create even more profit or distributed to shareholders = greed not satisfied, and speculators investors don't like that either.

        Paradoxically, and I can't remember the finical ratios to use (rate of return and some others), too much cash also increases the cost of capital ratio for a company.

        And the is also the psychological effect of too much cash on a company, It increases risk by creating overly confident management.

        Yes, it's crApples fault the share price has dropped, but it will reach a equilibrium point where all these factors will balance out, then crApple will "invent" a new iFad, stock price goes up, market get saturated, excess cash, stock price drops, more bad news because speculators Investors don't like yo-yo stocks unless they are shorting the stock in the market creating more price instability and so the cycle keeps repeating.

      2. Snake

        Re: Don't blame Apple for the price drop

        I personally think that some of this past year's events proves some Apple naysayer's point: that a good deal of Apple's "success" was simply the Cult of Jobs.

        Now that Jobs is gone, big money is frightened that the cult consumers will no longer throw unending piles of money at the firm in an unrequited battle to constantly have the latest gadget. The analysts are scared that people will lose faith in Apple having a unified theme across their marketing systems; the public will back away from the rabid endowment of near-godlike properties towards anything Apple and therefore actually examine possible alternatives at their next purchase phase.

        And competition for the mind of a consumer is bad for business.

        And, quite simply, Apple is helping the doubt right along. Between the failure of Maps, the market shrug of 'excitement' due to a perceived lack of substantial model evolution of the iPhone 4 in light of Samsung's all-out Android attack, the lack of great iPhone lust in China, the eventual and rapidly increasing decline of the iPod market, the sales cannibalism of the iPad Mini (rather than opening a brand new market), etc etc etc - the analysts might have a good point. Apple has stumbled lately, and Big Money listens. Big Money get scared very quickly and runs for the caves at the first signs of trouble (note the well placed cro-magnon reference there

    7. Chet Mannly

      Re: Don't blame Apple for the price drop

      "Blame those short termist Analysists who gaze into crystal balls and predict a companies earnings for the next quarter.

      There is no fundamental difference between the above and any of those on-line gambing sites"

      Thanks for reminding me just how irrational people choose to be when it comes to Apple. *Apple* release the earning forecasts, analysts report on whether Apple met their own targets.

      The reason a small shortfall causes a share price drop is because Apple's share price was valued based on constantly exceeding earning targets and being a market leader in terms of revenue. It isn't a market leader in smartphones anymore, and the lead in tablets is rapidly shrinking.

      The unmistakable trend is that Apple move first into a market, getting an early lead, but long term they get overtaken - and the share price is based on long term earnings.

      As the article rightly points out, Apple is also highly dependent on a few products, while its competitors are diversified. Eg If the Sony Z smartphone sales tanked they still sell plenty of movies, TVs, audio equipment, music, playstations etc etc. If iphone 5 sales tanked tomorrow Apple would quickly find itself on life support.

      For that reason alone Apple is a far more risky stock to hold long term than a company that is diversified, so its share price will be more volatile.

      Sorry to ruin your rant about all those nasty analysts wrecking apple with the truth...

      1. Philip Lewis
        FAIL

        Re: Don't blame Apple for the price drop

        "The unmistakable trend is that Apple move first into a market, getting an early lead, but long term they get overtaken - and the share price is based on long term earnings."

        This statement is illogical and therefore incorrect

        You cannot conflate market share (I take "being overtaken" as referring to market share) and earnings to reach any meaningful conclusion.

        FYI, AAPLs earnings are gargantuan.

    8. Colin Ritchie
      Paris Hilton

      Re: Don't blame Apple for the price drop

      I posted this in 2010 when APPL share prices were rocketing:

      -------------------------------------------------------------------------------------------------------------------------------------------------

      "Stock Markets are greedy just like people.

      I'm no financial expert and the only person whose previous actions I regret are my own. Damn! I shoulda put £2000 in APPL shares in 1996 when they were in double digits and the stock wasn't split... twice over.

      Hey hindsight is a wonderful thing, but let us look at what makes this news newsworthy and how it relates to the "real" world we live in, posting on geeky forums.

      Share price is relative to market confidence and previous performance, Wallstreet loves a player who plays to win and looks good in the process.

      As long as Apple keep producing products that trigger lust in the general public and sell their highly sexed image with even higher priced kit as fast as they can develop it, the stock will rise.

      If Steve Jobs goes mad or dies the market will turn on APPL like a wounded bear. Fact.

      If Apple manages to throw all their current tech sex appeal down the toilet in a Vista moment® the same will happen but probably not so savagely.

      For now we can all bask in the knowledge that somebody makes a phone even a moron can look smart using and an operating system even my 64 year old mother isn't intimidated by.... much.

      Why Paris? See the previous sentence. :)"

      ---------------------------------------------------------------------------------------------------------------------------------------------------

      Since then I built myself a Hackintosh for a third of the price of an equivalent Mac Pro and bought a £70 Android smartphone which works just as well as an iPhone for what I need it to do.

      What have Apple done to surprise and delight their customers in the last year? I think the share price changes reflect that well enough.

      Now who's been left looking like a bunch of quants? Rich quants mind.....

  2. John Latham

    Free investment advice from a recruitment consultant

    Good luck with that.

    1. Joe Drunk
      Coffee/keyboard

      Re: Free investment advice from a recruitment consultant

      Thanks for that! Nothing like a good laugh on a dreary Monday.

    2. Shagbag

      Re: Free investment advice from a recruitment consultant

      LOL.

      As pointed out, "the only consistent performance of fund managers is under-performance" So go and pay the 'professionals' to lose it for you, if you want.

      1. John Latham

        Re: Free investment advice from a recruitment consultant

        I wouldn't pay a fund manager either, FWIW.

        On topic: Apple is a massive cash generator. Nobody knows if they can sustain it.

      2. silent_count

        Re: Free investment advice from a recruitment consultant

        Ah but the professionals lose it for you... professionally! It takes years of specialised training to think it's a good idea to flush piles of cash down the toilet, don'cher know.

  3. Dazed and Confused Silver badge

    Big differences between Apple and Oracle

    Apple sells lots of hardware, at very high margins.

    Well we all know what's happening to Oracle's HW line.

    But the big difference is that Apple's customer base love them, whereas Oracle and set about deliberately pissing their entire customer base off.

    1. Anonymous Coward
      Anonymous Coward

      Re: Big differences between Apple and Oracle

      *Loved them

      Get on twitter and you will see that a lot of celebs are starting to hate Apple and are telling the world. The problem that Apple have is that an awful lot of their customer base are image driven. The high take up of the iphone was largely due to the hype by the media and all the celebs gushing about how great it is. If the iphone is no longer the phone to be seen with sales will tank faster than other manufacturers whose sales don't rely on the fickle fashion sector.

      Here is just one example from Nick Frost who has quite a large following:

      https://twitter.com/nickjfrost/status/313983820531646464

      There are many other people not just celebs feeling the same way and if you deluded Apple fans with a detached sense of reality would like to disagree, a quick google will show just how often these anti-Apple feelings are raising their head these days.

      1. Gordon 10 Silver badge
        Mushroom

        Re: Big differences between Apple and Oracle @AC 1344

        Dear God!

        Someone on El Reg thinks Twitter has any significance other that self-masterbatory navel gazing.

        Did you wander here from Wired? Aww Bless. New Shiny thing make it all better soon.

        1. Anonymous Coward
          Anonymous Coward

          Keep up Gordon

          Or you may find the world has moved on while you are still wondering what happened. Twitter does have its uses even if you aren't narcissistic enough to broadcast every little thing you do in the hope someone is vaguely interested.

      2. Anonymous Coward
        Anonymous Coward

        Re: Big differences between Apple and Oracle

        The iPhone user base is far more loyal and less 'fickle' than the Android user base. I see plenty of people looking at the new HTC One instead of the new Galaxy S4 - and why not.

        Some celeb having a bit of a hissy over their iPhone will be just the same about their whatever-next phone - the real tragedy is some people actually care what phone someone else likes / dislikes.

        1. Chet Mannly

          Re: Big differences between Apple and Oracle

          "The iPhone user base is far more loyal and less 'fickle' than the Android user base. I see plenty of people looking at the new HTC One instead of the new Galaxy S4 - and why not."

          You DO realise both of those phones are Android right? Or would you call a fanboi fickle for choosing between an iphone 4S and a 5?

          *slaps forehead*

          1. Anonymous Coward
            Anonymous Coward

            Re: Big differences between Apple and Oracle

            Chet = Moron

            iOS = Operating system

            Andriod = Operating system

            Apple = Manufacturer delivering iOS based handsets

            Samsung = Manufacture delivering Android based handsets

            HTC = Manufacturer delivering Android based handsets

            The fickleness of the a user base would be manifested by the propensity of users to choose a different manufacturer when changing phone.

            The Apple user base (like Nokia was in days of yore) are particularly loyal and satisfied with the brand and the product.

            It is yet to be seen whether, in the long run, Samsung can generate the same level of loyalty for their products when world+dog can (and do) produce products that are functionally identical due to reliance on a generic operating system. HTC is but one of a great many examples.

            Really, some of you people need to go to business school before pontificating. The level of simple concept confusion demonstrated here at the Reg, is starting to get out of hand.

            1. Anonymous Coward
              Anonymous Coward

              Re: Big differences between Apple and Oracle

              Way to miss the point which was that Apple users are no longer as satisfied as they once were. If a customer is not satisfied then they will not be loyal to that company. It doesn't matter whether they choose to go with Samsung, Nokia, HTC, LG or whoever, what matters is Apple loses those sales and does not have enough of a product range to compensate for the lost sales.

  4. Anonymous Coward
    Anonymous Coward

    "Of course you can get more investment returns by taking on more risk."

    This has been frequently and consistently shown to be incorrect, since ,at least, the 1970s -- by a number of Nobel prize winners at that. Has the author not been keeping up with the times - or is he stuck in the 1950s?

    1. This post has been deleted by a moderator

      1. Anonymous Coward
        Anonymous Coward

        Re: Evidence

        Here's something simple for you shagbag:

        http://en.wikipedia.org/wiki/Low-volatility_anomaly

      2. Anonymous Coward
        Anonymous Coward

        Re: Evidence

        There's also a recent paper available (for free) on the Social Science Research Network (SSRN) that might provide the evidence you crave: "Low Risk Stocks Outperform within All Observable Markets of the World"

    2. Anonymous Coward 101

      "This has been frequently and consistently shown to be incorrect, since ,at least, the 1970s -- by a number of Nobel prize winners at that. Has the author not been keeping up with the times - or is he stuck in the 1950s?"

      That might be true when it comes to stocks and shares, but within companies, that does not follow. Investing a lot of money in R&D for consumer electronics is high risk, but potentially very high reward.

    3. fatchap
      WTF?

      Reading?

      Maybe learn to read?

      The key word is "can", if a 1000:1 outsider comes in and you have all your money on it you will be better off than if you had invested in any low risk investment.

      Of course you may loose everything but that is the definition of high risk

      1. Anonymous Coward
        Anonymous Coward

        Re: Reading?

        " ... if a 1000:1 outsider comes in ..."

        Sound like gambling, not investing.

        1. Steven Roper

          Re: Sound like gambling, not investing.

          And the difference is...?

    4. Mei Lewis

      Have you got a reference for that, written in terms a non-economist can understand?

    5. Chet Mannly

      "This has been frequently and consistently shown to be incorrect, since ,at least, the 1970s -- by a number of Nobel prize winners at that."

      Name one. You are talking complete and utter bullspit

      1. Michael Wojcik Silver badge

        "This has been frequently and consistently shown to be incorrect, since ,at least, the 1970s -- by a number of Nobel prize winners at that."

        Name one. You are talking complete and utter bullspit

        How about the Haugen and Hines "Old Wine in New Bottles" paper?[1] Better returns from low-volatility portfolios; volatility is claimed as a proxy for risk. You may disagree, but "bullspit" is not an argument (as well as being a tragically flabby euphemism).

        [1] Another version of the paper by the same authors can be found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1783797 (link to PDF). From the abstract: "These papers were the first to document the lack of positive relationship between risk and return in the empirical cross-section of stock market returns." (emphasis mine)

      2. Anonymous Coward
        Anonymous Coward

        Black, Jensen, Scholes. "The Capital Asset Pricing Model: Some Empirical Tests." In Studies in the Theory of Capital Markets, edited by M. C. Jensen. New York: Praeger, 1972.

        Argued that many investors who demand high returns are leverage constrained and choose to increase their expected returns by overallocating to high beta (high risk) stocks.

        Myron Scholes won a Nobel Prize.

  5. Anonymous Coward
    Headmaster

    Market Cap of ARM, $209bn ? WTF !

    It's actually $18.5bn.

    Dominic Connor is a financial head-hunter but hopeless with a calculator.

  6. Jonathan 29

    pathetically dependent?

    I suspect you know that MS is also pathetically dependent on Windows and Office. MS has a greater PE number than Apple, but I know in my mind which has the brighter foreseeable future.

    1. aahjnnot

      Re: pathetically dependent?

      No. Microsoft has much greater diversification than that in the business world, which is where it derives the bulk of its revenues. For most companies, Windows desktops and MS Office are lost in the roundings of their total IT infrastructure costs; that's why desktop Linux hasn't taken off in the business world - the potential savings aren't big enough to justify the effort.

      Part of Apple's problem is that a huge proportion its profits are derived from two products - the iPhone and the iPad. Both are market leaders, and it's hard to grow market share when you're in front. If either product falls out of fashion (how many iPods do you see these days, for example?), or is replaced by a newer model that doesn't find favour with consumers, Apple's profits will take a very sharp tumble.

      1. Dave 126 Silver badge

        Re: pathetically dependent?

        >Part of Apple's problem is that a huge proportion its profits are derived from two products - the iPhone and the iPad. Both are market leaders, and it's hard to grow market share when you're in front. If either product falls out of fashion (how many iPods do you see these days, for example?), or is replaced by a newer model that doesn't find favour with consumers, Apple's profits will take a very sharp tumble.

        Very true. So if I were Apple, I would want to make myself market leader for whatever the next "mp3 / smartphone / tablet" thingie is, and a pile of cash would be bloody helpful in that aim. Cash to both to pay more people to develop it faster, or to buy in a company who has the technology they need (like they did with Fingerworks' multitouch patents and experience).

        Having cash can only help them get preferential treatment in the supply chain, too.

        1. Anonymous Coward
          Anonymous Coward

          Re: pathetically dependent?

          Bullshit they are not market leaders android fones and tablets outsell them by a large margin. Apple are for the easily led.

        2. xperroni

          Re: pathetically dependent?

          So if I were Apple, I would want to make myself market leader for whatever the next "mp3 / smartphone / tablet" thingie is, and a pile of cash would be bloody helpful in that aim.

          You'd think that, however if that were true, why isn't IBM still the unquestioned top business computing company? Why aren't we all using Nokia handsets? Why isn't AOL the face of the web?

          The sad truth is that as soon as a company settles into a market niche and way of doing things, it becomes nearly impossible for it to change – even when its life depends on it. Nokia saw the writing on the wall years beforehand, and yet couldn't get a new act together before it was too late; more recently, HP's thrashing about aimlessly trying to reinvent itself produced a couple amusing headlines and little else.

          Of course Apple did manage to do it once; but I'd posit it had more to do with a flash of genius from Steve Jobs than to any feature of the company as a whole. And I doubt that, even if he was alive today, he'd be able to do it again.

        3. Chet Mannly

          Re: pathetically dependent?

          "iPhone and the iPad. Both are market leaders, and it's hard to grow market share when you're in front"

          What planet are you on? The iphone was overtaken ages ago by the Samsung Galaxy line alone, let alone Android as a whole.

          Its hard to grow market share when your market share is dropping!

      2. danny_0x98

        Re: pathetically dependent?

        Though Microsoft regroups things every now and then, they have business groups which frequently show losses. Apple may derive more of its profits from the best-sellers, but none of its product lines are losing money.

        Before we leave leave Microsoft, we note a few things, other than a quarter when they wrote off their silly acquisition, they consistently put cash into the bank; a few good products — for awhile — can pay for products which are aimed at developing a market; and their stock does okay: no crazy jumps up or falls down.

        Apple's P/E ratio, I'm assured, suggests its price is a bargain today, but I am not an investor. Here's the way I look at it. The stock had an amazing ramp up in 2012 and one perception was that taxes would go up in 2013 because the US elected the same people to office late in the year. So people took their profits in the fourth quarter. When there are more sellers than buyers, the price goes down.

        Besides, the notion that stock acquisition is fueled by a wise assessment of the long-term potential formed by careful analysis of a company's products, competitors, and markets is quaint. Nowadays, stocks sell because one algorithm for a pool of funds predicts that price growth will not hit a target at the sell price while another algorithm for another pool predicts the opposite for the same buy price.

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