Apple CEO Tim Cook speaks during an Apple product launch event at Yerba Buena Center for the Arts in... [+]
There has been an awful lot of angst and hyperventilating about Apple's (AAPL) stock price movements in the last few days.
"Apple has now entered BEAR Market territory. Down 11% from its high" was one tweet I saw yesterday.
It sort of goes with the territory, I guess, when you're the biggest company in the world with a market cap in excess of $600 billion that even small percentage moves in the price of the stock get outsized attention from critics.
Every small percentage drop in the stock means a change of billions of dollars in absolute terms. In fact, I even saw one loony post in Forbes asserting something like Steve Jobs would have fired Tim Cook over releasing maps and then seeing a subsequent destruction of $50 billion in Apple's value in the subsequent days.
Well, the same thing happens on the upside. Yesterday morning, Apple's stock briefly fell below $630/share around 11am eastern time. The Apple bears' negative tweets reached a fever pitch around that time. Over the next three hours, Apple "created" $12 billion in market cap value out of thin air with its rally.
That's 3 Research In Motion's (RIMM) for those keeping score at home -- another analogy Apple critics like to use when describing the company to make it seem as though it is trading at unsustainable bubble levels.
An 11% drop in Apple's stock from its all-time highs sounds like a lot -- until you actually use a little historical perspective to keep everything in context.
Consider this:
- August 2004: Apple's stock trades at $14. It shoots up to $45 by February 2005 and then declines 23% to $34 by May. Later, it goes to $80 by January 2006.
- January 2006: Apple's stock is at $85. Seven months later, it drops 42% to $50. And then by January 2007, It gets back to $92.
- December 2007: Apple is at $200. In February 2008, it drops 41% to $119. But by May, it is back to $188.
- August 2008: Just before Lehman fails, Apple's stock trades to $176. Three months later, it drops 53% to $82. And yet 10 months later, it gets back to its August 2008 highs.
- December 2009: Apple is trading at $211. One month later, it drops 9% to $192. And 10 months after that it reaches $317.
- November 2010: Apple is now at $308. It then rises to $360 by March 2011. Three months after that, it drops 11% to $320.
- November 2011: Apple trades at $366. By April of this year, it gets up to $636. Then, it drops 17% to $530 by May.
- September 2012: Apple reaches an all-time high of $705 before an 11% pull back.
In the grand scheme of things, an 11% decline from the highs means nothing.
Yet, the Apple bears will continue to claim that it's a sign of the end of this historic bull run in the stock.
The only other thing that makes Apple bears complain so loudly as when the stock goes down is when it goes nowhere. And, it turns out, it does that quite a bit.
Consider these long periods where the stock went nowhere:
- From November 2004 - May 2005
- From January 2006 - November 2006
- From May 2007 - March 2008
- From November 2007 - August 2008
- From September 2008 - July 2009
- From July 2009 - February 2010
- From April 2010 - September 2010
- From October 2010 - June 2011
- From July 2011 - December 2011
- From April 2012 to August 2012
If you're a short-term trader -- meaning less than 3 months typical hold time -- you could have traded in and out of Apple over the past 8 years and done terribly -- or really well.
I'm not saying you should buy-and-hold Apple or short-term trade it. My point is to realize that price fluctuations and pull backs are perfectly normal -- even 42% pull backs - for Apple.
Think about all the complaining and gnashing of teeth about Apple's decline of the last week on Twitter in the last few days and then stop and recall that the stock is up 59% year-to-date.
Maybe some of the bears think the history of Apple innovation is about to come to a grinding halt now that we've passed the one-year anniversary of Steve Jobs death. Hey, if you believe that, you can make that trade -- and I will happily take the other side.
[Long AAPL]
