Apple stock drops, but don’t panic: this usually precedes huge earnings growth

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Apple stock drops, but don’t panic: this usually precedes huge earnings growth
Apple stock is crashing. The stock suddenly looks bearish despite the super successful iPhone 5, the new iPad mini and upgraded iPad. Is it time to panic?

Not so fast. Even though Apple just lost an Intel of valuation over the past couple of weeks, that might be more of an unsurprising reaction from investors. Asymco’s Horace Dediu studied 13 cases of Apple stock going bearish starting with the iPod launch in October 2001. Interestingly enough, a pattern emerged.

“Every dramatic drop in share price was followed by a surge in earnings growth,” Dediu concludes. For example, when the iPod launched, Apple stock was already down around 70% and then continued dropping by another 20%.

It could all be summarized in the lack of certainty from investors. Summing it up, investors tend to push the stock gradually up when confident, but pull it down dramatically when not.


We don’t know whether this time around the same pattern will hold. What we do know, is that panic is probably not the best reaction.

source: Asymco


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