Books written by Ray Sullivan

Sunday, 28 October 2012

Apple Shares Dive South

I don't know about you, but whenever I read anything about Apple that includes numbers, my head spins.  I'm not bad with numbers generally, my degree is in maths, but it's just that whatever seems reasonable in the normal world just doesn't cut it in Appletown.

Take the number of iPads sold since the device was released two and a half years ago - over 100 million devices.  Given that the iPad is expensive by any measure (another Apple number that makes my head spin) and that the world has in general been in the longest financial squeeze since the depression, that's a remarkable number.

Now look at the optimism surrounding the iPad mini, with ten million units ordered and the intention that five million will be sold before Christmas.  At the time of writing this optimism is technically unproven as there isn't a single iPad mini physically sold, but judging by the discussions I'm being dragged into I have no doubt that Apple's optimism will be justified.

But the biggest numbers that stop me in my tracks is the stock price, the value per share that determines what Apple is technically worth.  We all know a little about stock prices - they reflect more than the value of the company inventory and it's liquid assets. In fact, the stock price, in very bad circumstances, can actually value a company at less than the known value of it's inventory, however in reality the valuation is way above that simplistic number and factors in intangibles such as intellectual property rights and customer loyalty.  Of course these intangibles are determined by highly qualified individuals following agreed protocols and algorithms that make the whole process easy to understand.  Or not, but there you go.

Mid September Apple was estimated to be worth somewhere in the region of $563 billion.  That's one heck of a lot of greenbacks, with shares trading at $702 each.  Since then it has launched the iPhone 5 and the iPad mini to an expectant world and with little in the way of criticism.  In fact, despite a few bloggers carping about the launch price of the iPad mini, mainly by me, by all accounts,  there has been little but raised expectations about the company.

However, when Apple ceased trading on Friday it had lost nearly $80 billion off its mid September value, nearly 14%.  Market analysts are throwing reasons into the air like confetti at a wedding, with about as much effectiveness.  Some are suggesting its a small slump (small??? - $80 billion ain't small by any reckoning).  Others are suggesting that Apple are releasing too many products in succession - that may be true and if they weren't selling it might have been a good analysis, however there isn't anything to suggest there's likely to be a stock surplus hanging around in iPad minis or iPhone 5s anytime soon.

Some are suggesting that having peaked at over $700 a share, investors have taken their profits and are now looking to reinvest - either in artificially depressed Apple stock or maybe in Amazon or Google stock as they gear up for the Christmas war for tablet sales.  I think there could be a fair amount in this.  I don't know if Apple are worth $563 billion - hell, I'll stick my neck out and say that they are almost certainly not worth that much.  Don't ask me how much they are worth, my teeth fit my mouth and I don't wear brightly coloured braces over a striped shirt, but I'm certain that no company making mobile phones, tablets, laptops and selling other peoples music and books is ever going to be worth that much.  So some speculation in early September and profit taking over the last five weeks sounds likely to be the main reason for the price drop.  Normal activity for the parasites that  drive the economy, I guess.

My other guess is that within the next few weeks some of that 14% will recover, but probably we won't see Apple hit anywhere near $700 a share until after the Christmas results are released.  If they continue to slide, then there is a deeper problem than pure greed, I guess.  Surely not the new connector!! So, if you're in the market for Apple stock, be on the phone to your broker first thing if you want to make a small profit quickly. Or do like me and just watch on the sidelines.  $600 a share might look like a steal, but I'll hang onto my cash for the time being.

Warning/caveat/get out of jail free card below.

Please note I'm a Sci Fi thriller writer who also writes comedic novels, I'm not a financial expert.  While I take a passionate interest in the technology around eBooks, eReaders and tablet computers I am not a financial advisor.  And virtually every share purchase I've made has failed to make any money, or I've hunbg on so long I've missed the boat.


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