As major technology companies go, Apple is about as unique as it gets. Despite tens of billions of cash in the bank, and a market capitalization pushing toward a trillion dollars, Apple remains as fragile as a startup.
That seems to be Apple’s nature; not just in the stock market, but in the minds of market analysts, investors, and technology pundits. Apple is always teetering on the edge of disaster, regardless of the profitability.
On What Goes Up
My fear for Apple’s financial future isn’t monetary. It’s perceptual. All publicly traded companies have stock prices that go up and down and Apple is not an exception.
I can’t see that AAPL is more volatile than other stocks, but what I can see is a little of history and every company– somewhere, sometime in the future– falters, and that impacts the stock price.
Let’s look at a few companies which have prospered on Wall Street, done well for investors, but have faltered in mindshare and in the market, with dramatic negative results on the stock, but which have rebounded. IBM, Microsoft, and HP.
IBM was once the darling of Wall Street and seemingly owned both the mainframe and personal computer industries. Today, Big Blue is out of PCs entirely, had to partner with Apple to remain relevant in the mobile device space, yet has a market cap pushing $170-billion, a stock price just under record levels, a healthy P/E ratio, and a good dividend yield.
Microsoft may have made more millionaires than any company, the stock is approach record highs set back in the Dot.com bubble, market cap, though down is going up after a decade or so of flatlining (thank you, Mister Ballmer), a strong P/E ratio, and an enviable dividend yield.
To hear the tech press tell the story you would think that HP was headquartered in a trailer park in Bakersfield. The stock is down, but going up, not yet near recent highs or the Dot.com bubble, but P/E is respectable, and the dividend yield is better than a bank.
Through the years all three companies have had their heyday, a variety of ups and downs, and while their prosperity and impact on the technology marketplace is not what it used to be, they continue to prosper and few predict their demise any time soon. Only Apple appears to be capable of living life on the edge, a quarter or two away from extinction, despite the world’s highest market capitalization, a strong P/E ratio, crazy stock buyback amounts, and a nominal dividend yield.
The difference is that if you look at Apple’s stock price over the past 30 years or so you’ll see modest ups and downs for 25 years or so, then a hockey stick upward path that seems to defy gravity. Based upon the ups and downs of other publicly traded companies– and IBM, Microsoft, and HP, among many others– Apple is mostly an ‘up’ proposition. And if history proves to be an accurate indicator, what goes up that much, must come down.
When the down comes, and it will, all those who once predicted doom and gloom for Apple Inc will dust off their eulogies and stand in line for the funeral procession. But based upon IBM, Microsoft, and HP, among others, there will not be a funeral. Why not? It’s true that what goes up must come down, what comes down often goes back up.