Apple surges back over $100. Here's why
Struggling shares of Apple (AAPL) regained a heartbeat Friday - as the analysts pounding the table calling the stock a bargain were finally heard.
Shares of the gadget maker Friday surged $5.07, or 5.3%, to $101.42 - pushing them above the psychologically important century mark for the first time on a closing basis in 10 days. The shares' surge made Apple the biggest winner in the Dow Jones industrial average Friday, edging out Microsoft's (MSFT) 3.6% gain and outpacing the Dow's much-needed 1.3% jump.
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Apple shares have become a battleground stock for investors - who are trying to figure out how to price the U.S.' most important stock as it potentially faces the first slowdown in smartphone shipments in its history. Analysts have been slashing their smartphone shipment, profit and revenue estimates for the company as signs from suppliers and some retailers indicate weakness. Even after Friday's gain, shares of Apple have collapsed 24% from their highest point the past 52 weeks to erase $183.6 billion in market value. Shares have even been flirting with the freak-out lows of $92 a share it fell to last August during a market malfunction.
Why did investors have such a change of heart on Apple Friday? Let investors count the ways:
* Steadfast defense by analysts. Just as quickly as analysts have been cutting their forecasts for the fourth quarter, they've also been defending the stock and calling it a bargain. Credit Suisse, for instance, Thursday cut its expectations for Apple's iPhone shipments for the March quarter and the current calendar year. The research firm also said the poor relative performance of the latest iPhone will lead to disappointing gross profit, or the percentage of money kept from revenue after paying direct costs. But the firm, despite these warnings, still says the stock is a bargain and calls for it to be worth $140 a share. Credit Suisse isn't alone. Analysts on average think the stock will be worth $142.59 a share in 18 months.
* Hopes for the future. Long-time Apple bull, Gene Munster of Piper Jaffray, helped get the stock moving Friday by telling investors to focus not on the December quarter but yet the next iPhone cycle. He says investors over the next six months will start thinking more about the newest iPhone model and put the iPhone 6S and what could be disappointing sales performance of that model behind them. Munster says the stock could have 50% upside leading up to September.
* Cheaper valuation. The vicious selling in Apple shares has pushed the stock nearly to freak-out lows set during the market's malfunction late last year and the P-E ratio to about 10.3 times the company's earnings over the past 12 months. The stock hadn't been that cheap on a closing basis since July 2013 - right before the stock nearly doubled in value in the subsequent 16 months. Apple was one of seven stocks seen as being one of the most attractively priced - by analysts - following the market's recent drop. Apple shares at Friday's close are trading for 11 times trailing earnings.
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Apple investors are hoping this latest scare has finally priced in what's expected to be a slowdown in smartphone demand and the maturation of the industry. The broad market's bounce on Friday also helped to boost investor sentiment and reduce the fear factor of owning volatile tech stocks, like Apple. It's too soon for Apple bulls to declare victory, though, as the shares are still down 3.7% this year and the stock is still firmly in a bear market.
All eyes will be on the company's earnings report next week - to see if the market is being wise to scoop up shares of Apple, or naive or simply too early.
Matt Krantz on Twitter: @mattkrantz.