Apple vs Facebook: The Power of Sentiment

There is no doubt that shares of Apple (NASDAQ:AAPL) have been experiencing a downturn over the past several weeks. The tech juggernaut hit an all-time high in September, but officially entered bear market territory earlier this month. Interestingly, Facebook (NASDAQ:FB) shares have recently found support and outperformed Apple and other tech names. However, strong fundamentals and history show that the iGadget maker’s decline may soon be coming to an end.

Sentiment is a very vital part to the stock market. For the majority of the year, Apple could do no wrong, while Facebook was a social outcast. This changed shortly after Apple hit $705 a share in late September. The world’s most valuable company started to lose traction and fell almost 11 percent in October, its worst single-month performance in about four years. On the other hand, Facebook finished October only 2.5 percent lower, easily outperforming the technology sector and other popular names such as Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and LinkedIn (NYSE:LNKD). The social network continues to outperform in November, with shares up more than 10 percent.

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The general consensus was that Facebook would take a beating when its 804 million shares lock-up expired on Wednesday, but this was not the case. In fact, Facebook closed 12.5 percent higher, representing its second-best day of trading and the power of sentiment. It was also a notable move for a company that has lost half of its value in only a few months. Many investors viewed the lock-up as the final negative event on the timeline for the company, at least in the near-term.

Apple is experiencing a bunch of negative sentiment, but nothing has changed in regards to its fundamentals. It still makes highly popular products that it can not even produce fast enough to satisfy demand. Furthermore, its price-to-earnings ratio and cash hoard are reaching ridiculous levels. Consumers are cash-strapped during these difficult economic times, but this holiday season could easily be a blow-out for Apple and its completely refreshed product line.