Will Apple stock ever reach $700 again?

The iPhone maker's once high-flying share price has been diving for months. Are its best days behind it?

By TheWeek.com Jan 25, 2013 11:30AM
Just last year, Apple (AAPL) was a tech investor's dream, and its stock hit $700 in September as gadget junkies snapped up Apple's industry-dominating iPhones and iPads. Since then, however, Apple's stock has been in a prolonged slide. Even when the company announced better-than-expected quarterly profits of $13.1 billion and record sales of $47.8 million and iPads (22.9 million), its stock dove by as much as 12% Thursday.

What went wrong? Apple's profits went flat, fueling fears that its dominance is slipping as it tweaks old gadgets instead of unveiling game-changing new ones. 

With Samsung (SSNLF) and other rival smartphone and tablet makers making gains, Apple's stock is now trading around $450, and some analysts wonder whether the company can ever climb back to its peak. "Apple's been on top for so long now," says Matt Warman in Britain's Telegraph, "there is only one way it can go." 



Indeed, Apple shares will never get back to $700, says The Economist. The stock has recovered after being "mauled by bears" before, but this time is different. The company's visionary co-founder, Steve Jobs, is dead, and since his passing in 2011, Apple "has concentrated on sprucing up its existing products." These days, tech blogs are buzzing about Samsung's latest Galaxy smartphone, due out in March, the way they used to about iPhones. The nearest thing Apple has to the next big thing is an iTV, expected later this year, but it will have plenty of competition out of the gate and is "no surefire blockbuster."

Even if [Apple] produces a cheaper iPhone, pushes deep into China and wows the world with a smart TV, its shares will not reconquer last year's peak. Competition is now tougher in its core markets. Rivals will not let it disrupt new ones so easily. Apple may dip into its $137 billion cash lake to boost its share price by paying fatter dividends or buying back more stock. That would delight some investors, but others would see it as a tacit admission that the firm's great innovation engine has stalled. Apple won't crumble, but it has peaked. [Economist]

The fantasy that "Apple would be the first organization in history to grow forever" has finally dissolved, says Jeff Macke at Yahoo Finance. "What matters now is fixing the company." It can climb back with three drastic but simple steps. First, it has to fire Tim Cook, who took over in 2011. The company's stumbles are on him, and "it's time to give him the hook." Next, the company needs to fill its vacant retail head job with someone who has vision. Finally, it needs to unveil bold new products, instead of tweaking old ones by fiddling with their shapes and colors.

Innovative products that fail don't kill a company but milking the same old stuff forever does. As it stands Apple is operating on the playbook Sony came up with in 1990. It didn't work for them and it won't work for Apple.

 Until Apple finds the courage to move beyond its legacy the stock is dead money, at best. Shares will bounce and drop and gyrate, but long-term investors are better off elsewhere. [Yahoo]

But as "Apple's luster dims on Wall Street," says Andrew Tangel at the Los Angeles Times, its stock is actually "becoming a bargain." If any other company had posted an earnings report as good as Apple's, says S&P Dow Jones Indices analyst Howard Silverblatt, "we'd be breaking out champagne." When it comes to Apple, people have unreasonable expectations, so they're pushing the company's shares lower than they should be.

Apple's price-to-earnings ratio, a shorthand measure of a stock's value, has dropped to 10.5, far below the average of 15 for the broad Standard & Poor's 500 index. In other words, Apple stock is selling at a "steep discount," Tangel says. Investors might actually want to buy now, before Apple's stock starts going back up.

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4Comments
Jan 25, 2013 12:16PM
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Apple has a good, honest, report yet drops almost 30% from it's high just because the anylists "expected" more than the company said it will do.  RIMM goes up because it may offer a new Blackberry, in a crowded market that pushed the other Blackberry out not long ago.  Boeing has a fire problem with the new jet, all are grounded, yet the stock drops less than 5% !!!  Go figuer how the big boys think, if they do !!  No wonder the small investor wants out !
Jan 25, 2013 12:43PM
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This article easily qualifies as one of the dumbest ever posted by this site. It makes one really wonder about the competency or the objectives of the editors monitoring these posts.

There isn't one scintilla of evidence to question the future growth potential of this incredibly strong company. Their past performance was not based on sheer luck or the efforts of a single person. The team is still intact with the same visionary and innovative talent to continue and prosper. Any investor paying any heed to this article is either a fool or neophyte. I can recall that not too long ago the same garbage was written on IBM.

Jan 25, 2013 2:02PM
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The December quarter, Apple's first quarter of FY2013, was 13 weeks in length versus 14 weeks in the prior-year period.  On a weekly basis, Apple's revenue was $4.2 billion in the recent December quarter versus $3.3 billion in the prior-year period. On an equal week basis, revenue in the quarter rose 26.7%

 

Q1 2013: 13 Weeks

Revenue: 54.512B

EPS: 13.93B

 

Q1 2012: 14 weeks

Revenue: 46.333B

EPS: 14.03B

 

Using simple math and calculating Rev and EPS on a per week basis, let’s say the reporting periods matched @ 14 weeks:

Estimated Q1 2013: 14 Weeks

Revenue: 58.70B

EPS: 15.00B

 

Yeah, I would say they exceeded not only their own expectations, but also analysts’ expectations. That's a blowout quarter! Once all the traders have purchased their AAPL stock at these bargain prices, this will be the headline to push it back up. What are bunch of fear-driving quacks!

Jan 27, 2013 1:57PM
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They should split the stock 6 to 1.
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