AAPL rebounds from the ‘insanely insane’ sell-off

After seeing a quarter of its market cap wiped off as shares hit a half-year low, Apple has finally rebounded as investors return to senses with a big rally on Monday. The unexpected sell-off has been “insanely insane”, according to Topeka’s Brian White. AAPL hit $565.35 a share in after-hours trading.

It closed at $565.73 a share. All told, AAPL soared today $38.05, or 7.21 percent, its second highest one-day dollar gain since 1984. It also pulled Nasdaq and S&P 500 with it. Though still a far cry from the mid-September high of $705.07, it’s a good sign that investors haven’t lost confidence in Apple’s longer-term prospect, especially after eight straight weeks of losses…

Apple’s market cap at press time sat at $532 billion versus the almost $660 billion high in September. The sell-off that wiped out a quarter of Apple’s market capitalization – falling at one point below $500 billion, lowest since February – wasn’t entirely unusual.


For starters, institutional investors and hedge funds decided to cash in on AAPL when it was peaking. Some folks felt a sudden change of heart happened because of an anticipated U.S. capital gains tax rate hike expected to hit in 2013, also prompting several Apple execs to cash in on the stock.

CNN reported today that U.S. President Barack Obama called Apple CEO Tim Cook and other big name executives to seek advice on the looming “fiscal cliff” crisis.

That Apple’s past two quarterly earnings missed expectations was also a factor. Investors expected better iPad sales and worried the iPad mini isn’t priced low enough.

All of this combined has triggered a massive sell-off, in turn sending individual shareholders into the panic mode.

According to John Paczkowski of AllThingsD, the real driver behind the AAPL rally today is the revelation that the stock slide was “unmerited”. A number of analyst reports are now painting Apple as undervalued.

Topeka Capital Markets analyst Brian White wrote in a note to clients today:

The sell-off in Apple’s stock over the past eight weeks has gotten to the point of being ‘insanely insane’ given the depressed valuation, new blockbuster products for the holiday season, the attractive long-term growth opportunities that lie ahead and the company’s ability to distribute significant cash flow to investors.

He calls this pre-holiday decline “a historical pattern”.

Apple shares slip late in the year amid profit-taking and some irrationality or other. And then the company reports monster first-quarter earnings in January, and they spike.

Over the past decade, he explains, Apple shares fell an average of more than one percent in December back to 2002, and rose an average of more than three percent in January.

If you ask me, that’s actually a pattern big dogs count on.

When everyone is buying, they sell.

And when everyone is selling, they buy.

Make sense?