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By, Ann Sosnowski, American Capitalist
Overreaction. If there’s one word I could use to describe the recent stock action on Apple Inc. (AAPL:NASDAQ), I would say it’s overreaction.
Wasn’t it just Wednesday morning when Apple was pushed down in price, below its 10-day Moving Average, based on speculation that the tech toy company would see lower purchase volume of its iPhone than originally expected? The fact that AT&T (T:NYSE) didn’t see the high amount of iPhone activations it had expected sent investors in a flurry, selling shares and dropping AAPL down to $137.26 per share.
(Of course, the poor activation numbers did little to hold AT&T stock down, as it moved up to $40.50 per share on Wednesday, pushing the telecom company up to 13.5% for the year.)
Then, something miraculous happened. AAPL announced its third-quarter earnings, and they were phenomenal!
Apple announced a 73% gain in profit during the third quarter, compared to the year before. It also announced officially that it had sold 270,000 iPhones during the first two days it was offered. Apple saw a whopping $818 million in profit, or 92 cents per share, with sales of $5.41 billion!
What two little technological gadgets were cited as boosting Apple’s sales? Well, obviously the iPod -- which no matter what updates are made on it are always willing to be bought by the general populace, even if they have the first, second and third models -- and Mac computers.
Steve Jobs says that the company is well on its way to selling 1 million iPhones during its first full quarter of sales (the current quarter) and that its “product pipeline” is strong.
And while the iPhone, and the iPod still to some extent, are more frivolous technology items, Apple’s strong Mac sales set a record quarter, bringing in $2.5 billion on 1.76 million Macs.
I know a few of my friends were among those purchasers!
On such good earnings news, even with lowered guidance for the quarter ending in September, AAPL jumped right above its 10-day Moving Average, even hitting a new lifetime high of $148.50.
There seems to be some discrepancy between Apple and AT&T’s numbers for iPhone sales. Shared revenue between T and AAPL for the iPhone was not included into the third-quarter books. T believes that it may have to do with some activation problems it had from the get-go, which received full media attention, even though only 2% of new buyers had a problem setting up service.
What should you do with AAPL? If you’re holding it, continue to do so. The company’s stock, like many retailers, will see strong stock gains going into November on anticipation of Christmas sales. With the iPhone sales expectations, and maybe another iPod model being released (I didn’t hear that from anyone inside but I believe the company’s track record points to it) for Christmas, speculation will continue on the company.
If you want to buy AAPL, I would wait until the New Year; price usually drops down around then, and you’ll get a good premium so you can hold for more gains in the next few years.
Finally, before signing off on this week of financial news, I have to address the Dow decline from yesterday.
The Dow Jones Industrial Average dropped a whopping 361 points as I write about half an hour before market close on Thursday.
While it’s a massive loss, and many positions in investors’ portfolios are returning to their previous entry prices, a look at a historical chart shows that there isn’t need for worry yet.
If you look at a daily candlestick chart, the Dow made a similar, yet more massive drop down and below its 50-day Moving Average back in February 2007, when speculation about the American and Chinese markets, not being as strong as expected, pushed money out of the market in one swift swing.
One interesting note: The bottom of the Dow’s current trendline is 13,000. I wouldn’t be surprised if it hits that within the next few weeks. These corrections seem only huge when you don’t consider the phenomenal run-up stocks have had all year.
This is just a cyclical movement. We’ll get more into this on Tuesday.
Have a good weekend.
Ann
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