Apple shareholders have demonstrated a huge sell-off of company stock, which tumbled the price from its usual all-time high, but there are mixed signals on why they did it in the first place.
However, what was surprising was the rebound and a 7% surge. Shares pulled back a bit on Tuesday. The all-time high was $705.07 on September 21.
Most financial analysts believe that Apple with a stock price beginning with the number 6 or 7, was healthy and necessary. Keep in mind that Apple’s shares are still up nearly 40% year-to-date and have risen about 185% in the past three years. Any stock that goes up that quickly has to cool off from time to time.
Apple’s fundamentals remain ridiculously strong. Analysts are forecasting sales growth of 24% for fiscal 2013. That’s incredibly robust for any company, let alone a decades-old firm that it is expected to post annual sales of more than $190 billion next year.
The Apple sell-off is merely an exaggerated example of what’s playing out in the broader market. Investors are nervous about the fiscal cliff, Europe’s debt crisis and a potential slowdown in China. Apple would be hurt by a global economic slowdown, just like most other major blue chip companies.
As cliche as it sounds, Apple is now a victim of its own success. Many mutual funds and hedge funds own Apple, which means that institutional selling can quickly feed on itself as pros run for the exits. Making matters worse, Apple now pays a dividend that yields a healthy 2% — so its shares are likely getting hit by fears that taxes on dividends will rise if a fiscal cliff deal is not struck before year’s end.
“There is a big debate about what caused the drop, but it’s a market proxy right now,” said Mark Spellman, manager of the Value Line Income & Growth Fund in New York. “If you don’t like the stock market right now, you sell Apple. Period. It doesn’t matter if you like the new iPad.”
Spellman said he recently bought the stock for his fund, since it became attractive around $525 a share.