Apple share price weakness

The going has been tough for Apple shareholders over the last 6 to 7 weeks, for a number of reasons. After having started the year at roughly 405 Dollars per share the stock rose all the way up to 700 Dollars plus by mid September. An amazing and meteoric rise for any company, but this now became the most valuable company in America. People want these expensive products, because they are beautifully crafted. But in recent weeks there have been unrest and problems with their outsourced manufacturing facilities in China, and people have just not been able to get their new iPhone 5. The iPad mini has been priced at perhaps a little too expensive, and there might be margin compression there at some stage, as well as cannibalization away from their main product offering in that regard. The iPad 3 was given an upgrade. Some are expecting an iPhone 6 shortly and are almost willing to wait a little longer for that. That could see the current quarters iPhone sales fall comfortably short of the estimates. The quicker product cycle might not necessarily be a good thing for the allure of the products.


Added to that there have been recent management reshuffling, which obviously means that Tim Cook wants to stamp his own authority on the future of the company, I have no problem with that. Strangely, the stock has fallen to a level where the yield is roughly two percent. Some people point out that the world's biggest hedge fund is Apple Treasury with that enormous pile of cash and cash equivalents, short term marketable securities and long term marketable securities which is over 120 billion Dollars. Or, at the current share price of 537.75 Dollars, roughly 24 percent of the current price. Whoa! Apple are loosening the purse strings a little, but last year they generated 41 billion Dollars in net income. And capex has jumped significantly, to sort these supply chain problems out.


I suspect that there are going to be margin pressures for all of their products, but they would more than offset that with their increased product sales. The iPad mini sold over three million in three days, last weekend. Clearly people want the products as much as before. Too much too soon is my sense, plus people also pointed to capital gains tax regulations perhaps getting tweaked, meaning that some might lock those gains in this year, the stock is still up 35 percent year to date. The analyst community have pencilled in around 13.50 for the current quarter. Some are even suggesting that the dividend will become increasingly juicy. The stock still looks cheap, competition is hotting up, some are wondering if they have lost their way a little in terms of product innovation. We are still buyers on weakness around here.