I was looking at this chart showing Apple's stock curves over the last 5 years, and a strange thing caught my eye. I've only been an Apple owner for about 1.7 years, so I wasn't around during this time. But I'm very curious to know what caused Apple's stock to drop so suddenly (from like 50 to 20) on some day between the months of August and October 2001. Could someone enlighten me?
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Apple Stock Curiosity..?
- Thread starter TigerPRO
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In general, Apple weren't able to keep up with clock speeds and there was no amazing replacement for the iMac, which was the reason for the stock price rising in the first place. Besides those factors, there was a dramatic sell-off in the stock market after September 11th, 2001. All stocks were affected.
First of all, the giant crash happened in after hours trading on September 28 2000, not 2001--it had nothing to do with the 9/11 attacks.
And it was indeed a monstrous crash--50% of the value on massive trading volumes in a single evening. The irony is that there wasn't all that much of a reason; Apple issued an earnings warning for the quarter, but it was only a downgrade from the street-expected $165M to $110M on somewhat lower-than-expected sales, mainly of the now-infamous Cube.
Basically, as yellow said, it was part of the dotcom crash--Apple stock had been rising at a ridiculous rate for a while at that point and was overvalued anyway, but tech stocks were loosing steam rapidly and it apparently only took a small warning to cause investors to panic and jump ship despite there being no particularly big reason to do so.
I just wish I'd sold the small chunk of Apple stock I had during the irrational run-up leading there (which frustratingly I would have done had I had an e-trade-style account that let me do that easily, since I figured those numbers couldn't possibly last)--I could have bought the same number of shares a few months later for less than half of what I got out of it.
(It's funny, in searching for info on this, I ran across an archived discussion during 2000 about whether the dotcom thing was a bubble about to burst or a permanent change; in January 2000, there were people arguing both sides. By late in the year, the only posts were along the lines of "guess that question got answered".)
And it was indeed a monstrous crash--50% of the value on massive trading volumes in a single evening. The irony is that there wasn't all that much of a reason; Apple issued an earnings warning for the quarter, but it was only a downgrade from the street-expected $165M to $110M on somewhat lower-than-expected sales, mainly of the now-infamous Cube.
Basically, as yellow said, it was part of the dotcom crash--Apple stock had been rising at a ridiculous rate for a while at that point and was overvalued anyway, but tech stocks were loosing steam rapidly and it apparently only took a small warning to cause investors to panic and jump ship despite there being no particularly big reason to do so.
I just wish I'd sold the small chunk of Apple stock I had during the irrational run-up leading there (which frustratingly I would have done had I had an e-trade-style account that let me do that easily, since I figured those numbers couldn't possibly last)--I could have bought the same number of shares a few months later for less than half of what I got out of it.
(It's funny, in searching for info on this, I ran across an archived discussion during 2000 about whether the dotcom thing was a bubble about to burst or a permanent change; in January 2000, there were people arguing both sides. By late in the year, the only posts were along the lines of "guess that question got answered".)
Makosuke said:
Like so many other "dotcoms", tech stocks were massively over-valued. I just sold my Apple stock on wednesday. I bought after it hit the ~$12.00 low. A tad early to sell I guess, but after holding it for 4 years.. what the heck? Not a bad profit!
It was not the dot-com bubble, though that situation created the general overpricing of most stocks. The drop in Apple happened before a lot of the carnage from the dot-com collapse. Apple like many high flying stocks was priced for perfection. As long as they kept beating numbers, it was fine, but if they missed...
It was primarily Apple announcing that is would miss earnings estimates. By a lot. For all of 2001.
The iMac was aging and sales were slowing. Remember, this was still the original iMac, with the G3, and had been on the market for 3 years (how many computer models stay on the market for 3 years?). Also, education sales were a mess. They decided to reorg the division at back-to-school time...genius. At the time, Apple still had 30-40% of the education market. From that point forward, Apple's share has dropped to about 10%.
But mostly, it was because of the complete failure of the G4 Cube.
It was primarily Apple announcing that is would miss earnings estimates. By a lot. For all of 2001.
The iMac was aging and sales were slowing. Remember, this was still the original iMac, with the G3, and had been on the market for 3 years (how many computer models stay on the market for 3 years?). Also, education sales were a mess. They decided to reorg the division at back-to-school time...genius. At the time, Apple still had 30-40% of the education market. From that point forward, Apple's share has dropped to about 10%.
But mostly, it was because of the complete failure of the G4 Cube.
macidiot said:
I presume that last line was a joke because you got the rest of it just right.
By now I've seen it all with AAPL. I bought most of my current holding in 1997 at a split-adjusted basis of about $7.70/share. So yes I'm happy now, but I've been happier before (when AAPL peaked in 2000 at around $70.00). It's been a long road back, but I'm glad I held on (and even bought some more during the slump).
September 28, 2000 was a day I'll never forget. That afternoon it just so happened I was headed down to my bank to draw a cashier's check for a large purchase I'd just made. On the way home I made a decision to sell 200 shares of AAPL the following week to pay for the thing. When I got home I sat down at my Mac and checked with Yahoo only to find the value of my stock had halved just in the time it had taken me to get to the bank and back. Talk about an empty feeling in the pit of the ol' stomach. I found the money somewhere else fortunately but life wouldn't be quite the same for a long time.
AAPL quotes for that week:
http://finance.yahoo.com/q/hp?s=AAPL&a=08&b=21&c=2000&d=09&e=5&f=2000&g=d