Jobs' Resignation Will Boost Apple Stock

Aug.25.11 | About: Apple Inc. (AAPL)

Steve Jobs has always been one step ahead of the rest of us. His resignation is no different. Anyone who has closely followed Apple (NASDAQ:AAPL) stock over the last two years knows that its performance has severely lagged the performance of the company. Apple stock trades at the lowest valuation levels of the Steve Jobs era even as his legacy products cross a tipping point into critical mass. Why has the stock lagged the tremendous growth of the Mac, the iPhone and the iPad?

One of the key variables has been Steve Jobs himself. Many have mistakenly assumed that this stock trades with a Steve Jobs premium, but that doesn't make any numeric sense at all considering the single digit forward P/E. There is nothing that worries investors more than uncertainty, and there is no denying that the Steve Jobs health issue as been a black cloud hovering over this stock for quite some time.

Investors have been clamoring for Apple to do something that might jumpstart the stock action - perhaps a stock buyback, a stock split, or any other maneuver that might help to regain a 20+ P/E. The topic of valuation has been the elephant in the room with each and every Apple investor conversation ever since his leave of absence.

So what does Steve Jobs do? Before an unprecedented fall season, in which Apple will be releasing its new hit product for the first time in the heart of stock-running time rather than doing it during the beginning of a summer selloff in June (such a smart move can probably be attributed to Tim Cook by the way), Steve makes his announcement. He removed all uncertainty regarding Apple's succession plan, and yet he took the sting out of the moment by staying on as Chairman of the Board. It's a brilliant move that could end up having more of a positive effect than many realize.

Apple's momentum in the mobile tech revolution is secure for at least five years. Too many companies are adopting the Apple ecosystem into their own. When this phenomenon happens, as it did twenty years ago for Microsoft (NASDAQ:MSFT), the barrier to entry becomes too rigid for competitors to break through. Apple's App Store dominance gives it an edge in future markets such as televisions, cars, mobile devices, etc. The foundation of innovation has been laid for Apple's growth to carry this stock to $1,000 a share over the next two to three years. Apple won't feel the effects of missing Steve Jobs until the app era begins to mature. Until then, Apple stock will rise and it most likely will do so with even greater velocity now that the Steve Jobs uncertainty has been removed.

The Steve Jobs premium was a farce. Investors took him out of the equation years ago as Apple experienced its multiple contraction. Apple stock won't skip a beat. The fall season run will carry it to $450 by Thanksgiving. Steve's foresight in making this announcement now may prove to be another one of his many great contributions to Apple shareholders. The guy's timing has always been spot on.

Disclosure: I am long AAPL.