It was a sour Monday for the world’s largest technology company. Apple’s (NASDAQ:AAPL) stock finished down 3.11 percent, surfing a wave of general market negativity that had the Nasdaq finish down 0.87 percent and drove the S&P 500 away from an intraday high.
Here’s how Apple’s stock tumbled through the day:
It wouldn’t be fair to say that what’s happening in the markets right now is boring, but there is definitely a quality to the mixed “wait and see” and “bull” theses that are being thrown around that is exhausting. Some investors are convinced a contraction is coming, others are certain that momentum is building, and the rest are happy to make popcorn and watch.
The problem is that “something big” has been coming for a long time now, and everybody is tired of waiting. The bull market is growing old and something — anything — dramatic needs to happen. A similar feeling seems to have settled over Apple’s stock, currently down 28.45 percent year over year and down 19.37 percent year to date. Investors are waiting for the stock to buck the trend or continue to fall and find a floor.
What is interesting about Apple right now is what — if anything — will be the catalyst that reverses the trend and revitalizes growth. That said, at least two potential major catalysts have been hyped as the the one, but so far neither has panned out…
1) The iWatch
Analysts and observers across the bullish-bearish spectrum have pointed out that Apple’s historic claim to fame (and profitability) was its ability to define and dominate new product categories. This is effectively what happened with the iPod, the iPhone, and the iPad, which pretty much set the bar for MP3 players, smartphones, and tablets.
When it was first leaked, the iWatch generated a frenzy of speculative activity. If Apple could just invoke the spirit of its past self and successfully launch a category-defining product and become a leader in wearable technology, then maybe that downtrend would turn itself around.
But hype around the iWatch died down, and for various legitimate reasons. For one, hope is not a winning strategy. Assuming that Apple will create a best-in-class product is a gambit — one with some precedence but also one with substantial risk. It would be foolish to discount the competitiveness of Google (NASDAQ:GOOG) or Samsung (SSNLF.PK).
The other is that even if the iWatch is a smashing success, any rewards are far off. Mr. Market is infamously impatient, and investors are eager to put their money to work now, not later.
2) The dividend increase that never came (at least, not yet).
The anniversary of the reinstatement of Apple’s dividend came and went with much speculation but little action. While many investors feel like Apple is overdue to increase its cash payout, the company apparently felt differently. True to form, Apple is doing things on its own terms.
The average estimate of six analysts polled by Bloomberg puts a probable dividend increase of 56 percent on the table, hiking the yield up to about 3.7 percent, or $4.14 per share. At that rate, Apple would boast a dividend higher than 86 percent of the companies on the S&P index. However, when such an increase would come is still up in the air.
The expectation that Apple will do something with its $137 billion cash-and-investment war chest had two really climactic points. The most recent was the anniversary of the reinstatement, but before that it was David Einhorn’s initiative to convince the company to act. Apple has remained relatively mute on the subject. Expectations remain high, but once again investors are tired of waiting and the conversation is played out.