No Surprise Here: The Real Reason Apple Shares Are Plummeting

Wed, Jan 23, 2013

Good News From Apple

Apple (NASDAQ:AAPL) shares, once the darlings of Wall Street, are plummeting this afternoon.

No Surprise On The Real Reason Apple Shares Are PlummetingThe shares are down almost $50 in aftermarket trading hitting an almost two-year low of $460 a share.

The reason?

After the Stock Market closed this afternoon Apple released its latest earnings report. The results were pretty good.

It shipped 47.8 million iPhones. It sold 22.9 million iPads. It’s total sales in China increased to $7.3 billion.

The company also posted record revenues and earnings. Total revenues for the quarter were $54.51 billion. That’s an increase of about 27% compared to the same period last year. And net earnings were $13.1 billion. Both the highest ever posted by Apple.

The results were good. But more importantly for investors, they were not good enough.

Wall Street’s analysts were officially expecting earnings per share of $13.34 on revenues of $54.58 billion. So Apple beat the earnings estimates and just missed the revenue estimates.

But it’s clear with Apple’s share drop that analysts were expecting more.

This report is likely a harbinger of the future of Apple and should come to no surprise for long time Contrarian Insights readers.

Back in April of 2012 everyone was debating when Apple would reach $1000 per share and become a $1 trillion company. At the time we warned expectations were growing far too great and today’s “surprise” was imminent.

Here was the most important of our Five Reasons Why Apple is Not a Buy:

Analyst Ratings – There are 55 Wall Street analysts covering Apple. Their disastrous record aside, it’s easy to see there aren’t any surprises with that many eyeballs watching the stock.

Those analysts are also extremely bullish. 24 of them have “Strong Buy” ratings on Apple and 23 have “Buy” ratings. Only seven of them, or about 13% of analysts covering Apple, have a “Hold” or below on the stock.

With so many “buys,” who’s left to buy the Apple’s shares?

When everyone’s in, it’s time for the pain to begin.

That’s exactly what’s happening with Apple right now. There are almost no buyers left. Everyone who wanted Apple bought in. Now the shares are in virtual freefall.

Remember, successful Contrarian Investors always look beyond the fundamentals of a company and analyze the market’s expectations.

That’s the only way to avoid the immense risks that even some of the world’s most successful companies like Apple can pose to investors.

Good investing,

 

Andrew Mickey
Executive Editor, Contrarian Insights

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