Apple Inc. (NASDAQ:AAPL)’s share price is bordering perverse at this time. It no longer correlates to financials or even legitimate business prospects. The share price fluctuates on a day to day basis as more of a score board based upon the number of positive or negative blogs, rumors or Wall Street analyst downgrades versus upgrades.
Never mind that the opinions of analysts are historically erroneous. Last week an analyst at Jefferies downgraded assigning a price target of $420 while Apple was already in the $430 level. The downgrade scared the price down approximately $9.00 lower on Tuesday. It begs the question of –why- would a firm bother to come out with a downgrade with a price target about half of a percent below the already obliterated share price? They seem to be a little late to the party. What value does such a late downgrade bring to their firm’s clients? It would seem as they are playing the game of piling on.
How did Jefferies determine that a company that has already declined so substantially in the past month does not already reflect possibilities like a possible delay with the new iPhone 5S due to suppliers having trouble with the new casing colors?
After the substantial decline heretofore, how did they arrive at the number $420 being the new value for Apple Inc. (NASDAQ:AAPL)’s share price? Why not $390 or $418 as arbitrary price targets? On top of that, Jefferies indicated there might be a “25% chance of the delay.” Why 25%? And how long might that delay be, 2 days? 14? And how much will that possible delay ultimately cost Apple?
It seems as though these firms are piling on these downgrades in order to create a buying opportunity for themselves. Call me a cynic but I suspect we may be hearing a surprisingly positive tone from a slew of analysts in a few more weeks.
Possible manipulation aside, I believe CEO Tim Cook has demonstrated a degree of negligence in defending against such attacks. I can appreciate Warren Buffett’s opinion that Cook should ignore David Einhorn and “focus on running the company.” The stock is –not- the product. However, the CEO does have a fiduciary responsibility to increase shareholder value and he should be protecting the share price against the rumors and assaults from the outside when it gets to this magnitude. That comes with running a public company.
I’ve said before that raising the dividend and especially splitting the stock is not going to change the intrinsic value. I said that those actions border on gimmickry. However, much of Apple’s recent decline is clearly based upon the gimmickry of analysts; so if credulous “investors” have dumped or shorted the stock based upon such prosaic analysis, perhaps it is time to satiate the ignorant with some simple moves like a stock spilt and/or dividend hike.