updated 11:48 pm EST, Mon December 31, 2012
China worries, 'fiscal cliff' drive stock down in Q4
Apple finished the calendar year in 2012 with a strong lineup of holiday products, including a (wisely, as it turned out) refreshed iPad lineup that became the top-selling tech gift of the year. From a stock perspective, the last three months have been tumultuous for investors, however even with the recent drop of 27 percent, the company finished the year with a nearly 30 percent gain and is still the most valuable traded company in the world.
Fears of capital-gains tax hikes and perceptions (that remain yet to be confirmed) that the iPhone 5 has under-performed compared to the growth spurt seen by the release of the 4S the year before have helped to drive the stock down since the beginning of October. AAPL hit an all-time high of just over $700 per share in mid-September, ending a prolonged run-up of the price that had threatened to double the company's price in a single year. Most analysts are retaining estimates of close to $900 a share for a 2013 target.
At present, some feel the stock's price represents a buying opportunity, given both the drop in price at its low price-to-earnings (P/E) ratio of under 12. In particular, if the new year sees the arrival of any all-new Apple products -- such as the long-rumored HDTV set -- that do well in the market, the company's stock could well be undervalued. There is little indication that any of its three existing core businesses -- the iPhone, the iPad and the Mac -- are in any danger of peaking, and the company continues to be exceedingly cash-rich despite the initiation of a shareholder dividend and stock buyback program.
The sell-off in AAPL, due to an expected change in capital-gains rates for long-term investors (jumping from the current low of 15 percent to 25 percent) and even short-term investors (changing from zero to 10 percent) prompted many to lock in gains from the last few years -- which have been nearly unprecedented, particularly given the troubled US economy. An investor who purchased 1,000 shares of Apple stock four years ago today would have seen a return of 486.41 percent, and a pre-tax profit of $441,420 on an investment of just over $90,000.
The stock officially finished the year with a last-minute rally to $532.17, where it had spent the last week hovering around the $510 mark. Though there are very few who seriously believe the company won't have another record-breaking quarter when the company's fiscal Q1 results are reported in late January, the areas in which Apple does well and how its products hold up against increased competition -- particularly in the tablet space -- will be under close scrutiny by analysts to determine if the company can continue to dominate its key markets, and grow at the pace it has set for itself over the past few years.
By comparison, Microsoft's stock grew at a rate of just two percent for the year, and Google finished the year up only 9.5 percent. The overall Dow Jones Industrial Average closed 2012 up only six percent, while the NASDAQ average did more than twice as well at 16 percent growth. Still, the stronger market is a sign of a slowly-improving economy -- which will benefit Apple and its rivals as it brings new offerings to consumers and businesses in 2013.