Why Apple’s Stock Crashed. Why It Doesn’t Matter

What goes up must come down, right? The world’s stock markets have had a good run, which has abruptly ended.

Apple’s notoriously glamorous and somewhat volatile stock has been driven down harder than the stock market as a whole. Why? What happened? It can’t be the shorts.

Is there something fundamentally wrong with Apple? Are sales taking a dive to the gutter or simply pulling back because of a general economic slowdown?

Apple’s been on a sales and profit run for a few years now thanks to a resurgence for the Mac, the dominance of the iPod, and the high profile iPhone. What went wrong? Two things.

First, it can be argued that Apple’s stock flew much higher than it should have relative to traditional markers such as price to earnings ratio. That made many shareholders a lot of money and they sat on the stock.

Second, world stock markets are suffering in general, further depressing Apple’s somewhat volatile stock.

The company’s fundamentals remain sound; revenue will continue to grow even during an economic downturn, and profits, perhaps under pressure, will still be the darling of comparable tech companies.

Despite recent stock price drops since the beginning of 2008, APPL has performed very well over recent years, so much so, that any correction should not come as a surprise. Disappointment, yes. Surprise, no.

The stock market is in turmoil. Apple has no choice but to go with the flow, perhaps heading downstream for awhile, so to speak. A few stock analysts have downgraded Apple’s stock performance, which further depresses the price.

It seems like just a few weeks ago when analysts were saying that $220 per share was on the horizon. It still is. It’s just a horizon in a different part of the space time continuum, perhaps in a parallel universe.

In short, Apple’s stock was probably too high to be sustained in the current economic climate of uncertainty. Apple’s product margins are higher than most tech gadget companies and are likely to remain so, though Apple may trim prices to maintain sales.

Such a tactic works for me, as I’m in the market for a couple of new Macs. Sooner, rather than later, and despite the economy.

Why doesn’t it matter that Apple’s stock has taken a dive of severe proportions?

Sure, whatever goes up, must come down, but the stock market is a roller coaster ride at best, and right now all the riders are heading downhill. How long will it be before there’s the slow churn upward again?

If I knew the answer to that I would be vacationing somewhere on a tropical island. Wait, I’m doing that now.

Stock prices usually reflect the quality of a company’s financial performance, products, presence in the market place, executive management team, and customers. Who among Apple’s contemporary competitors fares better in those areas than Apple?

To paraphrase General Robert E. Lee, what goes south will rise again.

Do you have Apple stock? Are you sitting on it or bailing out? Share your comments with other Mac360 readers.