Apple, Down 13% In Four Months, Struggles

It could be that Apple (NASDAQ: AAPL) has not released a major product in a quarter. The consumer public and Wall St. are used to a new iPhone, iPad, or completely new device every few months. It could be that CEO Steve Jobs is ill, or that some analysts think smartphone sales have slowed because of the economy. Or, it could be that Google (NASDAQ: GOOG) Android-powered handsets have overwhelmed the iPhone in terms of wireless OS market share and that Android devices rule the new 4G universe.

It could just be that Apple’s stock has gone too far, too fast. Wall St. analysts have a median price target of $450 for the shares, and one researcher’s forecast is $650. To reach $450, Apple’s shares would have to rise 43% and its market cap would have to increase from $292 billion to $418 billion. That would move its stock market value beyond Exxon Mobil’s. The oil giant has the largest market value of any American company traded on a US exchange. Exxon’s revenue will be $400 billion this year. Apple’s will be $100 billion.

Advocates of a much higher price for Apple’s stock argue that the firm’s revenue rose an extraordinary 83% in the quarter that ended on April 20 to $24.67 billion. Net income rose at a faster rate–up 95% to $5.99 billion. Any company which grows that fast deserves a stock price that moves up at a similar rate.

But, Apple’s share are down 13% over the last four months to $3.14 from an all-time high of $364.90.

The center of the tech universe has begun to move away from Apple’s headquarters in Cupertino, as it did to some extent for Google as search became a smaller part of internet use and social media grew. Facebook has 700 million users now. Twitter has 200 million. Wall St. has not entirely figured out how these companies will become as large as Apple or even Google from a revenue standpoint. Investors just know that people only have so much time to be online. Every minute spent on Facebook is a minute in which the person does not use a product from the Apple App store or Google’s search products.

It probably does not matter if Android has more OS market share than Apple. The issue is what people spend their time doing, not how they get to the destinations where they do it.

Douglas A. McIntyre