Apple gets bruised on Wall Street

Steve Tripoli Jan 18, 2007

KAI RYSSDAL: Sometimes on Wall Street, you can’t win for losin’. Apple, the maker of the Macintosh computer and that music thing that everyone’s carrying, announced record quarterly profits yesterday.

Today, Apple shares took their biggest hit in almost a year before closing down 6.2 percent.

So what gives? Here’s Marketplace’s Steve Tripoli.

STEVE TRIPOLI: The iPod’s as hot as it was five years ago. Holiday sales drove Apple’s quarterly profits to the billion mark. And the buzz around the upcoming iPhone sent Apple stock soaring.

But today’s forecast for this quarter called for merely solid profits. Wall Street’s response? Yesterday don’t matter.

Larry Dignan covers Apple for the ZDNet publications.

LARRY DIGNAN: Well, part of it was the stock had a huge run. So, a lot of the stuff was baked in. And then too, there are some uncertainties.

Mostly competitive uncertainties. Microsoft’s new Vista operating system may cut into Macintosh sales. The iPod has growing competition. Apple’s video players do too, and without the iPod’s head start. Then, there are CEO Steve Jobs’s potential stock option backdating problems.

Analyst Roger Kay of Endpoint Technologies adds that the stock’s already no bargain.

ROGER KAY: Apple’s so tippy right now. I mean, the stock is really, really high. The multiple is enormous. So, a lot of it is built on future projections. And if any little thing goes wrong, then the stock could certainly dip.

But ZDNet’s Larry Dignan says there’s also potential upside.

DIGNAN: They have a lot of cool technologies coming out. You got a operating system upgrade coming down the pike. You’ve got, probably new hardware coming, the iPhone, the iTV.

Roger Kay thinks this combination of upside excitement and downside worry is a formula for investor schizophrenia.

KAY: I expect to see the stock be pretty volatile over the next little while, as nervous investors run in and run out afraid to either miss out or lose out by holding the stock.

So, greed’s in a struggle against fear on Wall Street. What else is new?

I’m Steve Tripoli for Marketplace.

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