Apple Succumbs to the $500B Market Cap Curse
Expectations often trump reality in the stock market.
In its latest quarterly earnings release, Apple (AAPL) reported a record 47.8 million iPhone sales, $54.5 billion in revenues and projected revenues of $41 billion to $43 billion for the current quarter. But analysts had anticipated 50 million iPhone sales, $54.6 million in Q1 revenues and guidance as high as $45.6 billion for the current quarter.
Apple shares plunged after the earnings announcement and shares were down another 11% by mid-morning Thursday.
Jeff Macke, co-host of Breakout on Yahoo! Finance, says Apple shares have peaked.
“Now it’s just a matter of whether or not [Apple] becomes one of the previous list of companies that obliterated shareholders since they hit over $500 billion,” he says. This list includes Cisco (CSCO), Intel (INTC), Microsoft (MSFT) and General Electric (GE). “So far Apple has given back over a quarter billion dollars of market cap,” Macke adds.
“When you get that successful—picture Wal-Mart (WMT), Microsoft -- there’s nowhere to go. You run out of ideas,” says Macke.
Related: Apple Could Fall to $350 But More Likely a "Bear Trap": Ritholtz
He recommends three ways Apple can reinvent itself:
Fire CEO Tim Cook. “The biggest questions [about Cook] were whether or not he could be an innovator, whether he could replace Mr. Jobs, who was an icon, a legend...that question has been answered," says Macke. He’s innovated nothing and failed at his core competency in operations, Macke argues.
Hire someone to run the retail stores—a position now unfilled. “They need to get a new guy in there…ideally Ron Johnson….bring the guy back," says Macke. Johnson held the job previously and excelled at it, then left to run beleaguered retailer J.C. Penney.
“Do something” with the $140 billion in cash on hand. “Put the money to work," Macke notes.
Tell Us What You Think!
What 1, 2 or 3 changes should Apple make to revive the stock?
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