It’s that time of year again for Apple (AAPL) investors. The first or second week of June is when the company typically hosts its annual Worldwide Developers Conference (WWDC), a gathering of developers who use the platform and a time when Apple typically makes some major product announcements.
As the announcements came yesterday, AAPL lost ground and by the end of the day was down over 1.5 percent from the previous day’s close. If you watched that with a sense of déjà vu it should be no surprise, but is the reaction to the news has you worried you should consider it in an historical context.
AAPL has dropped in early June nine out of the last ten years, with 2014 being the only exception. Data for that year, though, was distorted by the fact that was the week that the stock underwent a 7:1 split. That is too regular to be a coincidence and there is a very clear reason for it: AAPL has become a victim of its own success.
Apple is, simply put, the world’s most successful company. They are dominant in consumer electronics, which is the dominant industry in today’s world and make profits that are, depending on your political outlook, fantastic or obscene. They have an $800 billion market cap. With that degree of success come exaggerated expectations that often bear no resemblance to reality, and at this time every year the stock is punished for failing to meet those expectations.
What Apple’s long-term investors should be concentrating on right now is that ten years ago today the stock closed at an equivalent price of $17.41, and dropped to as low as $16.63 during the 2007 WWDC. Of course, if you had seen that decline as an opportunity to buy the stock at a discount rather than as a warning you would today be looking at a profit of over 800 percent.
It is not just long-term investors that should see any AAPL weakness during the WWDC as an opportunity either. Traders should also consider that in almost all cases the decline in Apple’s stock that greets the ritual disappointment is followed by a quick retracement. Buying on the dip caused by the company’s failure to meet ridiculous expectations and by the market’s seeming belief that they know better than the most successful company ever what consumers want has proved profitable in the short-term too.
It is only logical that at some point Apple’s growth must slow or come to an end. They cannot, after all, account for the entire world economy. Over the last few years though there have been several periods when the naysayers predicted that that time had come and so far, they have been wrong every time.
There will always be those who root against success, I guess, just as there will always be those that see any new product or innovation from Apple as being a disappointment, but history is usually a good guide and on that basis this drop in AAPL is just like any other - a buying opportunity.