Few weeks ago Apple reported earnings and revenue that were above expectations. Sales of iPhones, however, were a little lower than predicted, and the company’s revenue forecasts struck some observers as underwhelming. In after-hours trading, the company’s share price fell 9% — representing $44 billion in lost market value.
Apple repurchase $14 billion of its shares after 8% decline
Apple is a key component of major equity ETFs like the SPDR S&P 500 ETF (SPY) along with the Technology Sector SPDR ETF (XLK) and the “QQQ” which is linked to the Nasdaq-100.
Over the past 18 months the company’s stock price has careened from $705 (in Sept. 2012) to $385 (last April) — a difference of almost $300 billion in market capitalization — and back up to $555 before this latest earnings report.
Speaking with The Wall Street Journal, Apple CEO Tim Cook said he was "surprised" to see the 8 percent drop in share price immediately following the release of Apple's quarterly results and wanted to pounce on the opportunity.
Cook revealed on last Thursday that the company has bought back some $14 billion worth of AAPL shares since an earnings call two weeks ago, saying the move is the biggest repurchase on record for such a short period.
Though Tim Cook was being “aggressive” in buying the shares of its own company, the move was not appreciated in certain quarters. There were people who thought that the cash could have been better utilized for driving growth at the company or for a new product launch.
With Apple’s price now approaching $500 this means that everyone who bought shares since October is now losing money and may be looking to salvage positions. That means bounces likely will be sold. A break of key support at $500 will unlock further selling. Apple is in a sector where seemingly healthy, hugely profitable corporations (Nokia, Blackberry) have been effectively wiped out within the space of a couple of years.