AAPL Stocks and What's wrong with them

[PyX]

Hey,

First of all, I'm not really that much into economics so I have a wrong basis for this subject... A thing that caught my attention lately is the AAPL stocks... I never really understood how it can go up or down.

Since last month, it lost like 50 dollars, starting at about 180 and dropping at about 130, but nothing catastrophic happened, hell they even updated 2 iPod lines!

My 100 bucks question is : Which factors will influence a company's stocks?

I know if there are bad news or something about a company, it'll obviously go down a lot, but even after an event like Macworld or WWDC, sometimes their stock is going down, when they are actually bringing good news about their future and present and bringing new stuff on the market.

Apparently, if they invest too much money into research and development, their stocks will go down, so this would be my explanation for these specific Apple Events where it's actually going down.

Also, stocks are updated like every 10 minutes. How is that even possible? Is there a person who's watching AAPL news all the time and setting something in the background? I mean, it's not up to Apple to give a value to their stocks, sure they can do something about it, but there's also an exterior source or something that can change it. If it changed like once a day I could understand, but every couple of minutes, I'm lost...

I'm pretty sure my questions sound stupid and everything, but I believe the answers would be rather complex in this case... especially because I have no economics knowledge (I'm in the science domain, so money is not my thing... except for the big salary :) ).

[slang123]

All i can say is, if everyone knows that stocks will rise at Macworld or WWDC then everyone would put their money in and take it out straight after. Trends are next to impossible to spot on stocks and shares, but from time to time you can find them, thats the hard part.

[MasterC]

Have you seen the US economy recently? It hasn't been doing to good. That could be a possible reason as to why Apple's stock has been going up and down

As for your question about how the stocks are updated - if I remember correctly from my high school econ class, it's due to the fact that it's constantly being traded in varying amounts, which causes the price to fluctuate.

[Elliott]

Yea. Apple's really not to blame here. The US's economy is in the freakin' tank.

[Hurmoth]

Yea. Apple's really not to blame here. The US's economy is in the freakin' tank.

It isn't? Have you seen all the problems they've had with products recently?

You can take the Safari blunder to start with, then there was MobileMe (both forcing users to install it and the start up issues). Then there's also the iPhone App Store issues and the new NDA. There's also the security blunder with the iPhone that allows users to make a call with the phone locked, or to bypass the security entirely (in a previous version).

Apple has had a nice long list of 2008 blunders. Apple is partly the cause of their stock going down.

[.Kompressor]

Market Corrections are probably happening in all industry's....as a result of the fall out in the financials industry. "Confidence" is sliding.

[sundayx Veteran]

Do some research when you buy Apple. Going in at 180 and looking at the price now at 130 should be expected. Releasing new products does not mean anything.

[the evn show]

My 100 bucks question is : Which factors will influence a company's stocks?

The value of a stock is equal to the price people are willing to buy or sell them for. What a person willing to pay is almost exclusively determined by what personal profit they'll be able to make will be.

How do you make profit from stock:

1) dividends

2) selling them

If I think that my yearly dividends for owning a given stock will make me more money than just tossing the money in the bank, I might buy that stock. If I think that when I sell a given stock it'll be worth more than I paid for it, I might buy it.

Figuring out whether or not a company is going to make money is the magic that makes some investors very wealthy and there isn't an exact science to it. Apple makes luxary goods: so in a weak economy they're probably not a good short-term investment (however buying Apple stock at $100 might be a good idea if you think that 8 years from now things will be better and Apple will be as profitable as Walmart is today).

I know if there are bad news or something about a company, it'll obviously go down a lot, but even after an event like Macworld or WWDC, sometimes their stock is going down, when they are actually bringing good news about their future and present and bringing new stuff on the market.

If I buy stock 3 months before Macworld at say $50 / share, and the day of macworld the stock is worth $100 I'm going to dump it: I've doubled my money, I'll take my profit and call it a day -- the practice is called 'profit taking'. The only reason I wouldn't take profit is because I think that there's a higher short-term point for the stock that's worth waiting for. Even if the long term trend is upward, there will still be spikes up and down, and I can make money buy buying and selling on those.

After the announcement I can evaluate what I think Apple's future position will be and either re-invest -- possibly picking up a few more shares because the price will be slightly depressed by profit taking -- or place my money elsewhere (ie: defense contractors, gold, or real-estate if I think the economy will continue to suck)

Apparently, if they invest too much money into research and development, their stocks will go down, so this would be my explanation for these specific Apple Events where it's actually going down.

R&D without pay-off is debt. If I think Apple is squandering money and that some other company will be a better gamble then I'll sell and buy them instead. Apple's R&D budget is fairly modest in comparison to their profit ($450 million / year or so, IIRC), and the results of their efforts have generally been good for their profits. For me the major considerations are:

Good things:

• Mac OS X has been generally well recieved and it's been driving the sales of new macs at a steady pace.
  
• iPod remains the industry leader and while growth is slowing, it doesn't look like any 3rd party is going to be stealing the market from Apple
  
• iPhone is has surpassed my expectations so far as sales and what is possible for a protable phone
  
• iTunes store: largest music retailer ever. That's an impressive accomplishment (though it isn't a huge profit center) and I think they'll be able to leverage that in the future.
  

bad things:

• Steve's not looking so good, there's no suitable replacement readily apparent. He's an important part of the companies success and I think his departure will noticeably impact stock price.
  
• Stock options nonsense
  
• Apple TV is generally a dud
  
• Lawsuits with the clone makers may shake-up their business model
  
• They're a luxury goods maker in a weak economy
  

Also, stocks are updated like every 10 minutes. How is that even possible? Is there a person who's watching AAPL news all the time and setting something in the background? I mean, it's not up to Apple to give a value to their stocks, sure they can do something about it, but there's also an exterior source or something that can change it. If it changed like once a day I could understand, but every couple of minutes, I'm lost...

There are millions of people buying and selling stocks every day. Every time someone says "I'll pay $x for y amount" and someone else says "okay" the value changes. The legal options for apple to directly influence stock prices are fairly limited: the most obvious one is to offer a buy back: "Well pay $x to buy up our own shares". If the buy back is sufficiently large then the average price will tend to rise toward that amount. They can also reduce the value of their shares increasing the number. if Apple is "worth" $10 and there are 10 shares then the value of the shares are $1 each: Apple could increase that number by issuing a stock split (we will double the number of shares you have). $10 apple / 20 shares makes each share worth $0.50. They can also 'create' new shares and sell them.

The numbers you see on the TV are typically:

1) The average transaction price over a period of time (typically the day)

2) the change in that average (typically from the final average from yesterday)

3) the number of transactions occurring (more trades than normal tells you share holders think a significant change in share price is likely)

It isn't? Have you seen all the problems they've had with products recently?

They've also been growing and ridiculously profitable for over a decade.

A company could make it's money by crapping in the mouths of their customers. If they were making hundreds of millions in profit every quarter, and they were selling 20% more mouth-pooping accounts this year than last then they'd be a damn good investment.

About your specific reasons:

• I don't think The Safari blunder (I don't know what you're talking about here) is going to effect Apple's long term profitability because I don't know what you're talking about: and if a nerd that makes his living writing code on a mac doesn't then the impact is insignficant.
  
• The crappy MobileMe launch is a short term hit, but not significant in terms of their total profit. It's impact on share price will be negligible in my mind. A few months of free service for a relatively small part of their business: it sucks, but not enough to make me think they'll still be paying for it in 2 years.
  
• The iPhone unlocking situation doesn't bother me at all because for generation 1 phones apple is paid their AT&T kick-back for sales, not contracts (if anything, I think that sold more phones than not -- It'd be a net positive to share price). The current list of iPhone problems (dropped calls, etc) are something I'm watching because a recall or mass warrenty program like the xbox could impact earnings. At the moment Apple is selling second generation iPhones hand over fist with no signs of slowing: it's a profitable business.
  
• App store: The costs to run are negliable and it's 30% 'free money' for work done by 3rd parties. I think the iPhone was a profitable product without the App store and so it's crap quality and the bull**** they're hitting developers with isn't likely to impact the short term stock price. Nobody but super-nerds know that iPhone development is burdened by rediculous NDAs and that the store is?in simple terms: a huge pile of crap. Until my mother complains about the App store I'm treating this like a "might not establish a dominenent market position" issue. For people that think that the iPhone is the next iPod and that want to double or tripple their money: that's a big deal. I'm in this for small gains and a crappy app store isn't getting in the way of that for the moment.
  

As an investor, I don't really care what customers think about the company unless that attitude is likely to impact their profitability. I'm confident that Apple's next two quarters will be good and that their long-term position (2 years) is strong so I tossed a few grand at buying up their shares.

As a consumer: Apple's performance is sketchy and Im' really annoyed by a number of things. I recognize that I'm an atypical consumer though (ie: I know what difference between CDMA and GSM are), so while I'm likely to spot the causes of long-term troubles quicker than somebody like my mom, I'm careful not to over-react. If my mom starts talking about how bad her new iPhone is (or trades it for a blackberry) I'll start to examine my choices. If anybody in my office says "I'm buying a Dell because Safari/Mac OS X are too risky" I'll probably dump my stock that day.

[HellScream63]

The problem is that since Apple removed "Computer" from Apple Inc. and everybody fired their financial advisor last week, they all sold their Apple shares as they wondered why their investors made investments in the fruit industry.

[absorbation]

If anything Apple stocks are healthy in comparison with the rest of the market. Everyone's shares are down, Apple proves to be no exception. It may be time to start investing in Apple while stocks are low, but with the unpredictable behaviour of the market at the moment, it is still a significant risk.

[sn00pie]

The US economy is doing horrible and thats one of the reasons why not just Apple, every company is losing share prices and etc. Apple closed at $105/per share yesterday and it's at $113.66/per share right now.

I personally think its a good time to buy AAPL stocks, and am actually considering doing it. But the prices today are more reflective of the actual value of what they should be. I don't think that Apple's stock is worth $180/per share it was going for just over a month ago.

[Fred Derf Veteran]

Luxury items are often the hardest hit during a recession.

[Cormier6083]

Luxury items are often the hardest hit during a recession.

I do not see you're sarcasm tags. :shifty:

[rajputwarrior]

don't even talk about this, i am not a happy stock owner right now...

[duritz]

i honestly would pull out of apple and invest in alternative fuel companies because they are the future. without energy there is no apple, products, etc...

just like the cell phone business back in the late 80's. imagine how much money you could have now if you bought motorola stock for $3 a share.

[the evn show]

i honestly would pull out of apple and invest in alternative fuel companies because they are the future. without energy there is no apple, products, etc...

Alternative fuels aren't profitable right now. Dumping a proven stock in a profitable company that has a target price of $180+ from numerous financial analysts to invest in some nebulous 'alternative fuel' company (who? BP? Shell? Exxon? The major oil companies spend more on alternative fuel R&D than damn near all "alternative fuel" companies combined)'

How exactly is this going to get me closer to retirement?

Why not invest in Monsanto? Without food we all die and they've been performing incredibly well over the last 5 years.

Why not invest in Exxon mobile? Without oil there's no plastics to make the electric cars and ipods AND we have a world-wide infrastrucutre build around burning oil for power. They've got a few years left, and their last 10 years have been pretty amazing.

For most of us, we buy stock to make money. While it's nice to support a pet cause or two most of us aren't willing to ignore things like "profitability" when planning our financial future.

just like the cell phone business back in the late 80's. imagine how much money you could have now if you bought motorola stock for $3 a share.

1987: $5.70/share. Since then there have been a pair of 2:1 splits, and one 3:1 split. You'd have 12 shares for everyone 1 you purchased, today's closing price was $5.70. You'd also have 80 quarterly dividends of roughly 2 cents over term ($1.60). That's roughly $82 per share profit.

Apple over the same time frame: $10.17/share. $0.72 (24 dividends of $0.03/share), and a pair of 2:1 splits. Closing price of $113. Total profit: $440 per share.

Walmart over the same time frame: $10.70/share. $9.60 (80 dividends averaging $0.12/share) and a 2:1 split. Closing price of $53.

Total profit: $113 per share.

Motorola has underperformed the NASDAQ for quiet some time and going back as far as 1970 it'd still be a bad investment compared to any of the current tech leaders (apple, microsoft, etc). Nokia would have been a better example, but they didn't get listed until '96

Likewise you could have just as easily bought Palm in 2001 and lost a fortune. From 1 share at $800 to 40 shares worth about $6.

[Skulltrail-old]

The value of a stock is equal to the price people are willing to buy or sell them for. What a person willing to pay is almost exclusively determined by what personal profit they'll be able to make will be.

How do you make profit from stock:

1) dividends

2) selling them

Not necessarily. Stock is determined by the overall value of the company. If the company does good in accomplishing its goals, its stock goes up. Stock, however, is started by the investments of the people; who are then respectively owners of the company once they purchase shares.

Apple's stock is going down because of the problems they are having. Problems=less cash flow. Less cash flow=reduced stock value. Shares remain the same until shareholders withdraw their investments in the company; which I doubt anyone will do now since they will probably lose money.

[Qumahlin]

Why not invest in Monsanto? Without food we all die and they've been performing incredibly well over the last 5 years.

Monsanto is slowly killing us all by tempting fate and continuing to use genetically modified products in most of their ventures. Thanks to Monsanto almost every human in a civilized nation has been exposed to genetically modified products due to monsanto using it in their refined items such as HFCS (High Fructose Corn Syrup)

I could go on and on about how Monsanto completely screws the average American farmer. Did you know that when you plant Monsanto seeds you don't own the seeds and you are not allowed to keep them? You only bought the "genetic pattern" for that year, and any remaining stock must be destroyed. Whats that? Some seeds blew onto your neighbors farm and he is a competitor of yours? Just call Monsanto, their lawyers will quickly shut down your neighbors farm for illegally growing their LICENSED genetic pattern even though the wind is the one that planted the seeds...

I'm not some crackpot who thinks genetically modified food is going to mutate us all, but I am smart enough to know that multiple trials have shown effects in animals and no long term studies have been done as to the effect of Monsanto's genetically modified products. Add in the fact that tests have shown frequently that GM food intended for animals is instead being diverted to the consumer market where that specific modification has not been tested as to what effects it may have on a human....well its playing with fire on a unimaginable scale.

/Rant

[aussiefloyd_fan]

didn't apples stocks do down to like 50 when the mac book air came out? then was up to 180 a few months later? I call that profit!!

[cpu killer]

It's just adjusting itself. Stocks get overvalued on desirability, something like new products come out and the stocks seem worth more than they are. The market prices go up, but eventually they all go back down to where they are actually valued. This is the same with prices going up after they are unnaturally low, they will drop below the actual value line, and then adjust themselves. This is how a lot of people make long-term money in the market.

Apples stocks were simply over hyped and shot up over their actual value (this is based on many factors and calculated many different ways), now they are just adjusting back. They will probably shoot back up again. Of course, this isn't the case with all stocks and companies, but I believe it accurately reflects Apple's case.

[Chad]

Monsanto is slowly killing us all by tempting fate and continuing to use genetically modified products in most of their ventures. Thanks to Monsanto almost every human in a civilized nation has been exposed to genetically modified products due to monsanto using it in their refined items such as HFCS (High Fructose Corn Syrup)

I could go on and on about how Monsanto completely screws the average American farmer. Did you know that when you plant Monsanto seeds you don't own the seeds and you are not allowed to keep them? You only bought the "genetic pattern" for that year, and any remaining stock must be destroyed. Whats that? Some seeds blew onto your neighbors farm and he is a competitor of yours? Just call Monsanto, their lawyers will quickly shut down your neighbors farm for illegally growing their LICENSED genetic pattern even though the wind is the one that planted the seeds...

I'm not some crackpot who thinks genetically modified food is going to mutate us all, but I am smart enough to know that multiple trials have shown effects in animals and no long term studies have been done as to the effect of Monsanto's genetically modified products. Add in the fact that tests have shown frequently that GM food intended for animals is instead being diverted to the consumer market where that specific modification has not been tested as to what effects it may have on a human....well its playing with fire on a unimaginable scale.

/Rant

Don't believe everything you read without doing the requisite research. My parents (and myself, for a time) are farmers, so I have first-hand experience with Monsanto. None of what you said above is true, especially your middle paragraph. That's just absurd. The biggest concern about genetically modified seed is some companies and countries are paying less for the seed, and in some circumstances not accepting them at all. All because of the made-up junk you posted above.

Not necessarily. Stock is determined by the overall value of the company. If the company does good in accomplishing its goals, its stock goes up. Stock, however, is started by the investments of the people; who are then respectively owners of the company once they purchase shares.

The overall value has little to do with the stock price. While the end of quarter estimates do impact the stock, they don't make or break it.

Apple's stock is going down because of the problems they are having. Problems=less cash flow. Less cash flow=reduced stock value. Shares remain the same until shareholders withdraw their investments in the company; which I doubt anyone will do now since they will probably lose money.

No it isn't. None of Apple's "gaffes" have really impacted the stock. Nothing compared to the House voting down the bailout plan or the general state of the economy. They are making money hand over foot yet the stock is still dropping. Google's is stock, while higher, has also dropped a considerable amount.

[Fred Derf Veteran]

Don't believe everything you read without doing the requisite research. My parents (and myself, for a time) are farmers, so I have first-hand experience with Monsanto. None of what you said above is true, especially your middle paragraph. That's just absurd. The biggest concern about genetically modified seed is some companies and countries are paying less for the seed, and in some circumstances not accepting them at all. All because of the made-up junk you posted above.

Actually, there have been court cases where Monsanto has sued people for that very reason. It was big news a few years ago. Here is one example taken from the Associated Press:

http://www.biotech-info.net/monsanto_drops.html

Schmeiser said he planted his 1997 crop with seed saved from 1996, and insists that any Roundup Ready growing on his land was spread by wind or by grain trucks travelling on roads adjacent to his fields.

In the statement of claim, Schmeiser says Monsanto has libeled him by publicly accusing him of committing illegal acts, trespassing on his land in order to obtain seed samples and improperly obtaining samples of his seed from a local seed plant.

Here's a Canadian example: http://www.percyschmeiser.com/conflict.htm

[betasp]

Not necessarily. Stock is determined by the overall value of the company. If the company does good in accomplishing its goals, its stock goes up. Stock, however, is started by the investments of the people; who are then respectively owners of the company once they purchase shares.

Apple's stock is going down because of the problems they are having. Problems=less cash flow. Less cash flow=reduced stock value. Shares remain the same until shareholders withdraw their investments in the company; which I doubt anyone will do now since they will probably lose money.

Stock price is based on speculation. It has little to do with actual earnings and "accomplishing its goals." Apple stock is going down because their outlook began slipping, based on speculation from "analysts." It has nothing to do with current "problems."

[Fred Derf Veteran]

Stock price is based on speculation. It has little to do with actual earnings and "accomplishing its goals." Apple stock is going down because their outlook began slipping, based on speculation from "analysts." It has nothing to do with current "problems."

That outlook will continue to slip due to the current "problems". It has everything to do with it. No company is isolated from the effects. It was, however, a good day to purchase soup.

[the evn show]

Not necessarily. Stock is determined by the overall value of the company. If the company does good in accomplishing its goals, its stock goes up.

No, it doesn't. By any reasonable measure Morgan Stanley was accomplishing their goals (strong earnings announced in the second week of Sept.) and a few hours later their stock dropped hard and within a week it was worth 25% of what it was. If people don't think your stock is going to make them money, they're not going to buy it. It's that simple. People see financial stocks as bad investments right now: the general feeling is that owning those companies puts you at extreme risk without an the chance for a proportional return.

Luxury goods companies are also risky investments during a recession/depression.

Apple's stock is going down because of the problems they are having. Problems=less cash flow. Less cash flow=reduced stock value.

Source? According to apples Q3 filings they've had the best third quarter in the companies history. Growth is above industry average, and they are rediculously profitable given their position in the market (~8% market-share with ~35% profit-share). Products are sitting in the channel for the same amount of time as they have for years, and they have no outstanding debt.

They have more money in the bank, more revenue, more physical assets, and have experienced strong growth for well over a decade. They're market leaders in some of the fields they compete in, and they have disproportionately high mind-share in the ones the markets that they don't lead.

What cash-flow problems are you talking about?

Shares remain the same until shareholders withdraw their investments in the company; which I doubt anyone will do now since they will probably lose money.

I'd make enough to buy a new motorcycle if I sold now, I'm not selling because I still think that $180 target is reasonable.