Dark days have arrived for Apple, as its stock prices falls from 2012 highs. One investor was bearish on the the stock when its was riding high, however: L.A.'s Jeff Gundlach.
Last year, Jeffrey Gundlach, the CEO of Los Angeles-based DoubleLine Capital, lay out what some called the most contrarian Apple trade imaginable. In spring of 2012, Apple was riding high, climbing to almost $640 per share in early April. It gave some of that back over the summer, but by September, it made all-time highs above $700 and Apple observers started seriously talking about it as the first $1,000 per share/$1 trillion company.
Back in the spring, Gundlach predicted, in effect, that Apple's run was over. He put himself in the mind of a risk-craving hedge fund trader — his reputation is as a solid manager of bond investments, although his exit from his previous employer, TCW, was controversial — and recommended betting that Apple's share price would collapse. He paired that bet, his short position, with a call to go long on natural gas, so cheap at the time that it was practically free: around $2 per million BTUs.
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Apple CEO Tim Cook speaks during an Apple product launch in San Francisco. Apple sold a record number of iOS devices in its fiscal quarter, but Wall Street was disappointed by profit margins.
Apple reported quarterly earnings for its first fiscal 2013 quarter on Wednesday after the markets closed. On the surface, the results were astonishing: Apple sold a record number of iPhones and iPads — 48 million and 23 million, respectively. It wasn't able to build enough iPad Minis to meet demand. It raked in $54.5 billion in revenue and netted a profit of $13.1 billion.
But. But. But...CEO Tim Cook set investors up for disappointment during his opening comments on an earnings call for analysts. "You're going to hear a lot of impressive numbers," he said. "But the most important thing to us is that customers love our products, not just buy them."
The numbers are monumentally impressive, but Cook emphasizes that in a weird way, Apple is now relying on customers' devotion to its products — and also to the Apple ecosystem that includes software like iTunes and new technologies like the Internet-based iCloud. Were the numbers somehow not impressive enough? Why the focus on soft values rather than on the bottom line?
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Apple reports quarterly earnings on Wednesday. Will they be strong enough to halt a stock price slide that began last year?
There's so much fretting around Apple right now that analysts, commenters, and Apple-ologists are calling today's quarterly financial results that'll hit after the markets close the mother of all earnings reports (Forbes is explicitly calling it that).
Why the high anxiety about the world's most valuable publicly traded company — and the most valuable California company by a substantial margin (Apple: $418 billion market cap; number two Google: $254 billion)? Simple: Analysts suspect that Apple's epic comeback story, from near bankruptcy to a mature company that's printing money with its monumental profit margins, is over. Nothing gold can stay, to borrow a line from a rustic American poet who never would have dreamed of an Age of iPhones but who would probably have been retroactively credited by Apple for his efforts to "Think different."
A view of the main entrance to Apple Inc. in Cupertino, California. The company's stock has been crushed over the past few months. How low can it go?
Last year, Apple's share price rose above $700. Some analysts started getting all crazy with their predictions for where it might go. Could Apple hit $1000 and become the world's first $1 trillion company?
For a while these calls didn't look so crazy. As a company, Apple was a beast. It could do no wrong. The declines were inevitable, but temporary. The stock would always recover and resume its inexorable match to quadruple digits.
Apple dipped below the psychologically important $500 per share barrier this week (it's since recovered a bit as investors waiting for it to dip below the psychologically important $500 per share barrier piled in). There are some serious and well-respected investors who are bearish on this stock. Jeff Gundlach, of L.A.'s DoubleLine Capital, is one of them. He's set a target price for Apple of $425.
The markets have put 2012 behind them. It was an exciting year. It was a crazy year. It was a maddening year. And if you invested in stocks, you probably made money.
Apple did briefly slip the surly bonds of Earth and touch the face of financial gods in 2012, busting through $700 a share and coming within striking distance of a $1 trillion market capitalization. It closed out 2012 on a strong note, up almost four and half percent, to $532.17.
If you'd bought a single share at the beginning of the year, you'd have seen a better-than-31-percent return on your investment.
That was more than double the S&P 500's return, a very respectable 13-plus percent, and much better than what the Dow managed, a mere 7.25 percent (which, it should be noted, is still more than three times the rate of inflation, currently running at about 2 percent).
Now, if you wanted that Apple return, you'd have been forced to endure some knee-knocking volatility — and you might be cursing yourself for not selling when the stock was trading at its yearly high.