Apple’s stock price dipped on Thursday on news that co-founder and CEO Steve Jobs has resigned, to become the company’s board chairman. Few companies are as closely associated with their chief executive as Apple and Jobs, but investors seem to think he’s left behind a strong company with good leadership.
Apple’s share price started Thursday at just under US$371, off about US$5 from its close Wednesday night before the news of Jobs’ resignation was released. After the announcement yesterday, the stock declined by about 7 per cent. Today, the price has bounced around and climbed back to about US$373 by noon EDT, then slid gradually again. Just before 2:30 p.m. EDT, as this was being written, the stock began climbing again.
For most of the year to date, the share price has been under US$360. It began rising fairly steeply in late June, following the company’s annual developers conference. The 52-week range is US$235-US$404. On Aug. 9, Apple actually became the most valuable company in the U.S., topping Exxon, with a market value of US$341.5 billion.
Market analysts were quick to encourage investors to stick with Apple’s stock, according to a summary of reactions in The Wall Street Journal’s MarketBeat blog. “While the stock could see some immediate headline pressure, we expect sentiment to rebound through next year with strong execution and new product cycles,” according to Barclay’s Capital, quoted in the piece.
“We think the impact from Steve Jobs is lasting, cementing Apple’s role in the digital age,” writes J.P. Morgan. The investment banker, echoing others, had praise for the new CEO, Tim Cook, who has been chief operating officer. “As COO, Mr. Cook has been integral to driving the company’s unprecedented revenue and earnings growth phase, [and] limiting disruptions to the operations.”
Some analysts think Apple may now put its vast cash hoard to work. “Additionally, we believe it is likely that the company will now look at using its cash balance favorably for buybacks and a cash dividend, which will help further drive shareholder value,” according to ISI.
Many observers expect Apple is set to continue to innovate successfully. “I expect [Cook], as well as the other talented managers, will continue moving Apple forward,” noted Michael Yoshikami, CEO and founder of YCMNET Advisors, via an email to TheStreet.com. “The bench strength of Apple is significant and many individuals have taken a greater role in the company given the developments with Steve Jobs’ health over the last several years.”
Investment bank Jeffries reiterated its “buy” rating for Apple’s stock and set a target price of US$500, according to one website.
Smartmoney notes that Apple’s price, whether falling or rising, could have an outsized impact on mutual funds portfolios. That’s because many of them have a surprisingly large number of Apple shares. The blog quoted from an earlier Wall Street Journal story: “Few stocks are as widely held in regular mutual funds as well as in hedge funds. Few affect the performance of so many retirement portfolios. This is especially unusual because Apple is such a volatile growth stock. In recent years it’s fallen by two-thirds and it’s quadrupled. Most of the other shares that crop up in every portfolio are dull ones like Exxon Mobil or Procter & Gamble or Johnson & Johnson.”
Smartmoney cited a Standard & Poor’s analysis that found that “26 per cent of all domestic and global stock fund share classes have Apple as one of their top 10 holdings.”
At the close of trading Thursday, Apple’s stock price had climbed to nearly US$374, off just 0.65 per cent.