Apple (NASDAQ:AAPL) is poised for transformation. Though only time will tell whether that takes the form of innovative new products, but in the coming days, it should take the form of a transformed public perception.
But before we get ahead of ourselves, let's back up for a moment.
Why was last week different from all others in the world of Apple? The company that could do no wrong took a barrel roll. It had its big lights put out. Its feet turned to clay. It... you get the point.
It stunk up the joint.
Shares of Apple fell more than 2% in trading on Friday, a red punctuation mark to a week in which it lost nearly 5% of its value. Friday even featured the previously unthinkable: a handwringing apology from Tim Cook for a job poorly done on the mapping program on the new iPhone5. And that wasn't even all the bad news stuffed into Apple's ignoble little week. Research In Motion (RIM), reliably fading into oblivion, reported earnings that beat expectations and Barnes and Noble (NYSE:BKS) unveiled more products designed to kick Apple in the shins. Meanwhile, Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) and everyone else with a tablet or smartphone and a dream kept at it too.
Apple, though, is poised to recover. The reasons go beyond mapping fiascos and competition attempting to breach their castle wall. We're talking the economy, stupid.
Traders spent most of the fourth fiscal quarter, which ended Friday, lost in the thought that the economy was recovering, which propped stock prices up against better judgment.
Last week, though, came a nearly inarguable shift. Pull back all those end-of-month-and-quarter economic reports and you'll reveal an economy that is nowhere near recovery.
Everything that should be up, was down - and everything that should be down, was up. Durable good numbers were the worst in three years, Gross Domestic Product was revised to show the economy a mere rock skip from recession, and consumer spending and real income were bad and worse.
In any normal week, market mood won't easily recover from such a deluge of reports. But this is no normal week. At best, traders will wait this week out for Friday's jobs report. In the void, while biding their time, traders will search for safety. There will be a gravitational pull toward healthcare stocks like Merck (NYSE:MRK), Pfizer (NYSE:PFE) and Johnson and Johnson (NYSE:JNJ), which offer comparatively recession-free business and dividends. And there will be a move back into Apple, even if just for the time being.
Nevermind Tim Cook's long-term worth or whether RIM or Barnes and Noble will rise from the dead to slay Apple in 143 years. This week will be about the here and now search for fairly reliable earnings. And though Apple reported disappointing third-quarter results and while you can marshal an argument that it will disappoint long-term, you will not be able, in this week of economic trial and tribulation, to get trader's greedy little eyes off the company's greater than 20% growth rate as far as you can adequately see.
Apple also has well over $100 billion in cash, roughly $125 per share. That's reliable. It's selling at about10 times fiscal 2012 earnings estimates, thanks, in part, to factors, like growth in China. The iPhone5, which wasn't available in the third quarter, now flying off shelves in the fourth.
Long-term, there is a lot to start considering in terms of Apple that might not be as pretty. But save that for another day - certainly another week. Short-term, as traders rethink assumptions about a recovering economy that had lifted plenty of stocks undeservedly, Apple will be one of the few safe havens.