Apple Inc. ’s market losses have a lot of smart people scratching their heads, which may be why even gurus like Carl Icahn and Warren Buffett can’t agree if the stock is a steal or damaged goods. S&P Global Market Intelligence says that since the stock hit its closing peak on Feb. 23, 2015, Apple investors have seen their wealth erode by a mind-numbing $240bn.
Apple’s losses bigger than Enron
Apple’s staggering loss exceeds even the losses of failed energy firm Enron. To some people, Enron is the epitome of a terrible investment, says a report from USA Today. Generally, the investors are looking at the price that Apple’s stock has fallen – 29% to $95 a share. As Apple is one of the most followed and owned stocks by professional and individuals, investors might miss the gravity of the decline of Apple’s share price.
It is quite a huge event, when a firm worth more than $700bn drops this much. And this event indicates how the firm is transitioning with different objectives to different owners. Anil Doradla, analyst at William Blair, agrees “we’re in a funk (with Apple stock) but you have to look at it long term.”
As per a research from Harvard Business School professors – Paul Healy and Krisna Palepu, Enron was quite famous among professional and individual investors, and at the end of 2000, it was worth $60bn. But stock investors were wiped out and the energy firm imploded following an accounting scandal, found the research. This means that Apple Inc. investors have lost around four times more in paper losses than the Enron investors.
However, the iPhone maker created much more stock wealth during its ascent than Enron, says Doradla.
Apple – a perfectly sound company
Tavis McCourt – analyst at Raymond James – says comparing dollar amounts of the decline is probably not fair as the iPhone maker created six to seven times more in equity value than Enron ever created.
BankruptcyData.com notes that fraud and faulty accounting caused the decline in Enron, making the energy firm the sixth largest bankruptcy in the US story. The smartphone maker has $233bn in investments and cash. It is a perfectly sound tech company.
As per a USA TODAY analysis of data from S&P Global, the $240bn erosion in Apple’s market cap makes it the fourth largest market value loss among the current members of the S&P 500. Apple’s loss exceeds Exxon Mobil that took a hit from the implosion of oil prices.
Comparing Apple Inc. with manias is not easy as it is only one company while the Internet bubble was characterized by hundreds. It should be noted that the tech giant is very profitable unlike many dot-coms which imploded. Over the past 12 months, a profit of more than $50bn was reported Apple.
McCourt says that it is not the first time that Apple stock has been this inexpensive relative to near-term earnings. He further adds, “When this last occurred, the optimists were duly rewarded.”