Apple Jumps After Barron's Calls Shares "Cheap"
A Barron's endorsement frequently leads to a strong move in shares. Most recently, shares of Tronox (NYSE: TROX) saw a powerful rally post-Barron's mention, popping over nine percent in a single session.
However, unlike Tronox, Apple is a mega-cap company with a widespread following. Still, shares saw a slight pop, trading up over two percent early Monday, outperforming the S&P 500 which was essentially flat on the session.
Barron's likens Apple's recent performance to 2008, when shares dropped roughly 40 percent before rebounding. Then CEO, Steve Jobs remarked that he had “never been able to figure out Wall Street.”
The publication lays the blame for Apple's recent 20 percent drop on tax-related selling. Despite the decline, Apple's shares are still up almost 30 percent year-to-date.
Many investors might have been sitting on massive paper profits. With taxes on investments likely to increase in 2013, it may have been prudent for investors to sell some of their position so as to lock-in the current, lower tax rate.
Barron's also suggests that some of the “fast money” has bailed on the stock, helping to accelerate the decline. But this money could return, when the company reports continued record profits.
The argument of tax-based selling and Wall Street overreaction seems attractive given that most of the selling seen in Apple came in the fourth quarter.
However, some the declines may have been fundamentally justified. The iPhone -- Apple's bread and butter profit machine -- has shown weakness in 2012, both on a sales and fundamental basis.
Several sell-side research firms have made comments in recent weeks suggesting that demand for the iPhone 5 may be worse than anticipated. Walmart's (NYSE: WMT) aggressive price drop of the device ahead of the Christmas holiday might support this notion.
Then, there's the device itself. Despite the iPhone's larger screen and boosted internals, competitors running Google's (NASDAQ: GOOG) Android OS might have simply produced better phones: Samsung's Galaxy S3, HTC's Droid DNA and Google's own LG-produced Nexus 4 all offer compelling features that the iPhone 5 simply doesn't have.
What's more, Apple's made a few notable fumbles with its mobile operating system, most notably its widely panned decision to abandon Google Maps in favor of its own shoddy alternative.
Lastly, there might be some forward projections baked into Apple's recent decline. The company's decision to get into the small tablet game eating away at margins, or speculation about the potential failure of an Apple TV.
Shares of Apple traded near $522 on Monday.
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