A trip down memory lane

Memory lane, maybe?

The oh-so-catchy headline above is the title of a Kort Session post I published April 25, 2013 (the post). To have the above prices reflect a subsequent (June 9, 2014) 7 for 1 stock split and the August 31, 2020 4 for 1 split the prices need to be adjusted to $25 and $14.50. Apple, post split, should open at about $125 Monday August 31, 2020.

When I started this blog I said I would not be making stock recommendations. It was only to be about detrimental media/Wall Street malpractice and hype that worked to disadvantage those who consumed it.I wrote back then:

“This will sound like one (a recommendation) and I will admit in the interest of full and complete disclosure, I did buy some Apple today.I did it because I felt that the media/street rant that followed the release of quarterly earnings was so stupid and such a massive Wall Street fade of sentiment, I could not resist.Caveat reader, I can be very wrong from time to time.There will be no follow-ups and I will not report when, and if, I exit the stock.

What I did not hear that morning “was the media brutalizing the analyst corps for herding investors into the name at $700 eight months ago (summer 2012).There was no disgust, nor was there any outrage at the lemming-like race to cut estimates and price targets this morning (4/24) after stock had fallen 40%.”

History may be rhyming here

Monday August 24, Apple hit a record high of $515.14. That morning, after the stock had made a $130 sprint in less than four weeks (simply on the report of an earnings surprise and the news of a 4 for 1 stock split), the J.P. Morgan analyst raised his target price on the stock from $430 to $520. For a moment that was the street high estimate until this: “Wedbush slaps a new street high price target on Apple.” Wedbush analyst Dan Ives’ base case target is became $600 per share. $600 is the base but he added a bull case could be made for $700 per share.

To me this is a warning sign and resembles the type of calls being made eight years ago.

That was then. This is now.

• April 24, 2014 Apple was $400 ($58 adj for a 7:1 split-6/9/2014)), yielding 3%, selling at 10x earnings (ex. $100 million in cash on the balance sheet 6x), total market cap $380 million. Nobody loved it.
• Today (8/27/20) AAPL closed at $500.04, yielding .66%, selling at 38x trailing twelve month earnings, 34 x ex. cash), market cap $2.138 trillion ( just about equal to the combined market cap of the entire Russell 2000 index). Today, like the summer of 2012, everybody loves it except for those bears making the negative call all the way up. Remember a stopped clock is right at least twice a day.

Full Disclosure

I have currently written calls against a portion of my Apple position and as I have stated above, I have been known to make mistakes. Apple is a fabulous company, the greatest consumer technology company the world has ever seen. For those of us who have been lucky enough to own the shares it has been a terrific ride. However, considering the widespread love affair that the street has had with the name and the analysts leapfrogging one another with increased price targets we may be due for some sort of replay of the 2012/2013 experience. Ergo, it may not be a bad time to take a few chips off the table. And, if the hype has got you thinking about adding to or initiating a position, maybe it is time to think twice.

Lest we give the appearance of picking on Apple, I would point out in this market, where it has been all about 24/7 tech stock parabolic leadership, there are many companies, much less substantial than Apple, that appear to be way out there on the end of the limb … continuing with the metaphor … ‘no tree grows to the sky’.

What’s your take?