miércoles, 19 de enero de 2011

Apple's Comeback: 3 Reasons Stock Has Bounced From Lows - Wall Street Journal (blog)

Trading in Apples shares today is something to behold.

With CEO Steve Jobs taking medical leave, the shares plunged 8% in Germany Monday, which was a U.S. holiday. This morning, Apples shares started trading about 6% lower. Ever since, they have slogged their way higher, as we had anticipated might happen just before the opening bell.

The fight for Apple has resulted in enormous volume more than 45 million shares traded in early-afternoon trading, already triple the average volume. Ahead of the post-close earnings report, Apple is down about 1.6%.

Why has Apple rallied in the face of tough news? Here are three reasons, with one warning.

One. Apple has become a must-have/cant lose stock for a lot of people, professionals and individuals alike. For this crowd, every dip is a buying opportunity, even if Apples market capitalization the second biggest in the land behind ExxonMobil is starting to raise reasonable questions about what Apple must do to support its valuation. Thus far, of course, Apple has had the answers (wildly popular product, strong growth) and the companys p-e is a rich but hardly vertiginous 22.6.

Two. Weve seen this play before. Mr. Jobs has had to stand aside from day-to-day operations, but the executive team, no doubt with guidance from Mr. Jobs, didnt miss a step. Some investors believe that Apple executives have already shown they can shoulder the burden.

Three. Most of the plans for the next two-three years are already in place. COO Tim Cook, the interim chief, has to execute more than invent. Of course, beyond three years, as with any tech phenomenon, becomes a tougher call.

One warning. All three reasons have merit, but Apple has also become an obsession stock. The company has put up real numbers and incredible growth (see valuation). At the same time, it is possible for a stock get unhinged from its moorings. A great company can become an expensive stock. Difficult to say if Apple is at that point, but the ferocious determination to erase the Jobs-related losses has some of that flavor.

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