Apple sell-off: About a year too soon

The media misled investors on Wednesday.

By TheStreet Staff Nov 8, 2012 2:40PM

TheStreet.com LoGoThe Apple Inc. logo is displayed on the back of the new MacBook Pro David Paul Morris/Bloomberg via Getty ImagesBy Rocco Pendola

 

My long-term Apple (AAPL) bear case might be playing itself out.

 

Doubleline Capital CEO Jeff Gundlach trashed Apple (AAPL) on CNBC Wednesday. He ripped the company's for lack of innovation, using the iPad mini as a verbal specimen.

 

Gundlach, short AAPL from around $610 in April, humbly admits he has been "sort of right and sort of wrong." That's a solid perspective.

 

He also lamented the loss of Steve Jobs. The innovator is gone. There's another thing I agree with.

 

On Apple, Gundlach and I share sentiment. That should make me happy. I am in the company of a market god.

 

In this world, that often leads to an article crowing about how right I have been all along. Label the remaining AAPL bulls clueless peasants and call it a day.

 

But I can't do that. It would be disingenuous.

 

And, to his credit, Gundlach isn't disingenuous either. You can smack that tag on about 95% of the financial media, though.

 

The media chose to ignore what really happened to AAPL on Wednesday (and will likely happen on several occasions between now and the end of the year) in favor of the frantic part of the story.

 

Here's the score: This long-term downfall that Gundlach sees happening -- and that on Wednesday the media harped on -- is somewhere between six to 12 months out, if it ever happens.

 

I don't buy the notion that, all of a sudden, the market is this well-oiled, forward-looking machine.

 

If it was, AAPL would have sold off the day Steve Jobs expired. And stayed sold off.

 

Instead, it's up 50% since Jobs's death. And that's after recent weakness. The market didn't just wake up sometime in September and decide, "yeah, now's the time to dump this thing; it's over."

 

Because it's not over. AAPL should still be the stock it used to be during periods of volatility and uncertainty.

 

I recall late summer 2011. The markets got volatile. We saw more than a few days of triple-digit losses in the Dow. In between the one-to-three day periods of weakness, we witnessed semi-strong relief rallies.

 

Other stocks deserve chest bumps, but three come to mind as ones that got out in front to lead those rallies -- Ralph Lauren (RL), Amazon.com (AMZN) and AAPL.

 

Even after factoring in Jobs's death, Apple has changed the least.

 

Ralph Lauren experiences weakness on concerns over a slowdown in high-end spending. Amazon stunts occasionally, at least in part because of how much it spends to grow. I don't agree across the board, but that all makes sense.

 

Apple falling off of a cliff since September? That's not sensible.

 

Apple sells out iPhone 5. Foxconn can't keep up with demand. Qualcomm (QCOM) throws down solid earnings, but that gets ignored in favor of a more hysterical focus.

 

Apple notches record iPad sales this past weekend. People wonder where the lines were.

 

You're telling me the long-term bear case gained all this traction in the last two months?

 

No way. The market doesn't look forward that way. It doesn't hammer a company like Apple on the basis of such qualitative uncertainty. And, if it ever does, it will not start with a company that, outside of Samsung, has ZERO competition and another record holiday quarter on tap.

 

No, the media chooses to report the spectacle. That's what happened Wednesday. Gundlach gave CNBC the same bear case he's been giving anybody who would listen for the last six months. There's nothing new there. Nothing.

 

However, a quick search of the Apple stories of the last 18 hours reveals a focus on this old news. Almost everybody took Gundlach's bear case and made it the headline like a bunch of irresponsible, blood-thirsty hacks.

 

They either ignored or buried the other thing he told CNBC: Investors have made loads of money on AAPL. Four more years almost definitely means higher capital gains taxes in 2013. As such, taking profits the day after the election makes perfect sense.

 

That's what happened yesterday. Nothing more than that mixed with other flavors of macro uncertainty, from the whole of the fiscal cliff to riots in Greece.

 

Get it straight: The real possibility that Tim Cook and his team cannot innovate the way they did under Steve Jobs will have no material impact on Apple's results for a least another six to 12 months.

 

In late January when Apple reports results from the current holiday quarter, we'll get validation of that thesis.

 

At the time of publication, Rocco Pendola was long AAPL via April 2013 call options.

 

 

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10Comments
Nov 8, 2012 6:39PM
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I look at it this way:  Apple has been cashing out over the past year on what Steve Jobs built.. They are kicking out products that are no longer innovative and not even what people are really after, but Jobs was a genius and convinced so many people that it didn't matter what the product was, they HAD to have it as a status symbol.  The problem is, with the lack of innovation and not being able to effectively claim that their overpriced product is better than everyone else's, it puts questions in people's minds about standing in line for the next great thing.  Add to this a collossal mistake - replacing a product with a newer product a mere 6 months after the release.  The "iSheep" lined up in droves for the ipad3, spending $700+ for the "latest and greatest", and before they had a chance to break them in, Apple releases the iPad4 with twice the processor power.  All the people who were sitting there feeling good about themselves for having the latest cool toy from Apple were all of a sudden the butt of a big joke.  Do you think these people will line up for the "next great thing" a year from now?  With the knowledge that Apple very well could trump them in a few months with something even better, I think they will sit this one out and wait for the next round. 

 

Then there is the ipad mini, which has even the most fiercly loyal apple fanatics scratching their heads.. Here is a piece of hardware that is pretty much geared at the people who "wannabe" apple fanatics but can't afford to buy a $1500 laptop or a $700+ tablet.  Last years processor, a screen from 2 generations ago, and a price tag that is barely more affordable than the newest generation of hardware.  It suddenly sounds like Apple is going the way of every other manufacturer in the world and offering a *gasp* entry level product!  So the ELITE status of Apple is going away.. When you have an "Apple" you no longer have the most expensive piece of hardware available, you no longer have the latest technology, now you could just have a functional piece of electronics that is still priced too high for what is inside.

 

Things like this will make people wake up and really look at what they have:  an overpriced piece of electronics that will be replaced with something substantially better in a few months.  A brand that once held some form of exclusivity but is now marketed to anyone willing to pay a couple dollars more for the most basic hardware.  And perhaps they will even see this is a brand that has drank their own koolaid in thinking they are the first to bring to market what they sell.. There are only a few things that hold true about Apple:  It is shiny and pretty, it is expensive, and it is NOT the best or the first.

Nov 8, 2012 11:05PM
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Better a year too early than a year too late.
Nov 8, 2012 7:36PM
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Capital gains selloff -  will bounce back .
Nov 8, 2012 7:25PM
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Two Microsoft laptops.  One Windows 7, one Windows 8.  They are both sweet...  LG feature phone...$35. a month.  No iApple here.  No iApple stock.
Nov 8, 2012 7:02PM
Nov 8, 2012 7:00PM
Nov 8, 2012 3:42PM
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I don't buy that what happened yesterday had much to do with the results of the election, and the fact that people will now be paying higher capital gains.  If that was the case and people thought the stock value would continue to rise, they might wait until it's closer to the deadline. 

 

Take a look at a 3-month chart of Apple's stock performance.  Asides from a few significant upticks, this stock has been steadily tanking since September 19th.  Since then, you're looking at several very significant daily and/or weekly losses.  At the current price, we're looking at about a 23% loss over what amounts to less than 2 months.

 

This can absolutely be turned around, however products like the iPad Mini or Apple Maps need a little more thought.

Nov 8, 2012 5:35PM
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People - this is insanity. I've never seen such a completely uncalled for case of Chicken Little-ism. Doesn't anyon e see or understand that this entire Apple sell-off is totally made-up by outsiders and people who KNOW nothing about the company, it's workings or strategies. Nothing but self-engrandisement, raw speculation and guessing, guessing and more guessing. If Tim Cook farts, the "market" panics that he has abdominal cancer.

 

Cut me a friggin' break already. Wake up and grw up and above all - why don't the experts just shut the f---- up and let things play out before playing God.

Nov 8, 2012 7:11PM
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I'm sure the sell off is partly because of Apple but my choice to sell my shares is because of who was just reelected and the waterfall that is just around the corner.
Nov 8, 2012 7:03PM
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capital gains taxes next year outrageous
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