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Is Apple's All-Time High Different This Time?

|About:Apple Inc. (AAPL)

You can't help but be excited about the anticipation surrounding Apple's (NYSE: AAPL) announcement coming up on Sept. 9. It seems as if the excitement for the latest edition of the company's revolutionary phone gets more and more rabid anytime. Add in the hotly anticipated iWatch, and Apple shares are looking tastier by the minute.

On Wednesday, AAPL closed at an all-time high at $100.53. But one can't help but ask the questions:

  • Is it simply because of the psychological effect of hitting $100?
  • Are we going to see another round of what happened in September 2012 when shares hit record levels, only to tumble roughly 24% by the end of the year?
  • What's going to happen once the hype over the Sept. 9 announcement is over?

Solid Support Proves Helpful

When the stock split was announced, it was really only a matter of time before AAPL breached the $100 mark. So it would be ridiculous to think that didn't have anything to do with it. After all, investors as a whole are irrational.

But the main reason for what happened back in 2012 was because hedge funds started losing interest in the company. For example, Reuters reported:

Notes stock pickers including Leon Cooperman and Thomas Steyer unloaded billions of dollars of Apple shares between Sept. 30 and Dec. 31

The post-Steve Jobs transition was expectedly a little shaky and it took Tim Cook a little while to get investor confidence back on track. That confidence continued to burgeon when the Board of Directors expanded the share repurchase program to $90 billion, and the stock split made shares more accessible to more low-end investors.

It also helps that AAPL received significant support in recent months from Carl Icahn, who took to Twitter Tuesday afternoon to gloat about his profits:

About 1 yr ago we tweeted to our followers about our investment in $AAPL and that stock was "extremely undervalued." Believed $AAPL to be one of my "no-brainers." Anyone that invested at hat time would be up 53% (including dividends).

D.E. Shaw and Ken Fisher of Fisher Asset Management, who have 11.88 million shares and 10.74 million shares respectively, can be added to that support. As can David Einhorn of Greenlight Capital, who recently said he believes AAPL to be undervalued. Both have boosted their stakes in recent months.

Room to Run

The iPhone accounts for more than half of Apple's profits, so you can say there's a lot riding on the sales performance of the iPhone 6. Current supply chain data shows Apple gearing up with Foxconn and Pegatron to produce between 70 and 80 million phones by Dec. 30. Citigroup estimates it will sell 140 million in the first 12 months, just under half the current estimated base of 300 million iPhone users. And with two different versions, a 4.7-inch display and a 5.5-inch display, it will certainly appeal to a broader spectrum of users.

The iWatch, on the other hand, is a toss-up. It's certainly not the first device of its kind on the market, but there's also a lot of people wondering if there are enough practical uses to make it compelling. But with CCS Insight's global forecast expecting smartwatch sales to rise from 9.7 million in 2013 to 135 million by 2018, there's certainly room an opportunity there, although I doubt it will ever become anything other than a niche success.

One thing that is certain to prick the ears of investors, though, is how much the company is putting into R&D. According to a Morgan Stanley report released early this week, Apple is reportedly spending $1.6 billion in the third quarter, up 36% from the same period last year. If spending continues at the same rate, it will be up 60% year-over-year by Q4. This could be a good sign to show that there is a promise of life after iPads and iPhones--because that kind of spending suggests there is much more in store than a simple upgrade of one of its current devices.


In conclusion, it's certainly not wild to say that the psychological effect of breaching $100 and the hype surrounding the iPhone 6 don't have a significant influence on AAPL's movement in the past few months. AAPL is one of those stocks that benefits from a sentiment factor beyond its financial indicators.

But with the support it didn't have back in 2012 and a couple of aces coming out of its sleeve in the next few months, along with who knows what (but it should be exciting) in the pipeline, there is no indication that we'll see the same kind of depression we saw after the last time AAPL hit such highs.

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Stocks: AAPL