Apple stock (AAPL) hit well beyond $127 per share several months ago, a pretty good time for stockholders, me included. It seemed like the stock price couldn’t falter. Then the stock market hit a snag and Apple’s price dropped. Cut to today and we see the stock price continues to fall, though it has recovered from some of its drop today. Why is this happening?
It’s purely speculation, but some think it began when the Apple Watch was released. Initial views were mixed and sales have been disappointing. While personally I think the watch has potential, the price and lack of features may be hindering its success, but that can’t be the sole reason the stock continues to fall.
Cue China where over the last few weeks there have been several negative reports for the Chinese economy. There are concerns that their economy may be slowing down, which have has an indirect effect on Apple because so many Apple products are manufactured in China. We are a world economy now, and it seems that every time a foreign nation suffers through a difficult economic period, it also affects the United States and other countries.
Now you may ask, what about iPhone 6s sales? It’s true that Apple has reported strong sales of the iPhone 6s and the 6s Plus. Katie Benner of The New York Times reports that the iPhone 6s broke previous first-weekend sales records. Monday, Apple said it sold more than 13 million phones, both models. That’s a lot of phones for a weekend, even for a worldwide release!
Why hasn’t this helped Apple’s stock price? It might have something to do with a rumor, reported by Roger Fingas of Apple Insider, claiming that circuit suppliers are concerned about a possible decline in iPhone-related chip orders. It’s claimed that Apple reduced the amount of iPhone parts to be ordered in the future at an undisclosed firm. Supply chain rumors are not uncommon, according to Tim Cook, “The supply chain is very complex, and we obviously have multiple sources for things.”
The stock market is almost like a religion, with parishioners gaining and losing faith sporadically. It is almost comical sometimes how one story can sway the market. People can act like anxiety filled people, with their fight or flight response in full swing, reacting irrationally. That’s why it is usually best to be a long-term investor. Holding a stock for a year or more generally pays off, if you invest in a company that has value. This requires one to weather the storm.
Case in point, I was a MasterCard investor when the stock split a couple of years ago. After the split, the stock tanked, and I found myself out a lot of money. I was tempted to cut my losses, but ultimately I decided to keep the stock. The company did have a positive price increase average over several years, previously. Well, it took a year, with ups and downs, but I eventually recovered after a year and made a little bit of money off the stock.
Apple is a solid company and I believe the stock price will rebound. It’s definitely a good time to buy Apple stock. Just be sure to keep it for the long haul and try not to get spooked. With the iPhone sales doing as well as they are, and with the potential for the Apple Watch to improve, I think there are enough reasons to be optimistic. Also, don’t forget the iPad Pro is just around the corner.