Apple’s (AAPL) market losses have hit epic proportions – explaining why big investors like Warren Buffett and Carl Icahn disagree if the stock is damaged goods – or a steal.
Investors have seen nearly $240 billion in wealth evaporate in their Apple holdings since the stock hit its closing peak on Feb. 23, 2015, says S&P Global Market Intelligence. That’s a staggering loss rivaling some of the biggest implosions in stock-market history – even exceeding stock investors’ losses on failed energy firm Enron, which many think of as the epitome of a terrible investment.
Investors simply looking at Apple’s price, which has fallen 29% from its all-time high to $94.20 a share, might miss the gravity of the decline given Apple is one of the most widely followed and owned stocks by individuals and professionals alike. When a company once worth more than $700 billion drops this much, it’s a massive event that signals how the company is transitioning to different owners with different objectives.
Some hope the big losses in Apple’s market value will attract back investors who see it as a value.
“Yes, we’re in a funk (with Apple stock) but you have to look at it long term,” says Anil Doradla, analyst at William Blair.
The sheer amount of stock market wealth erased by Apple is staggering as measured by:
* Exceeding market losses at Enron. The Texas-based energy firm, which once was also a darling with many professional and individual investors, was worth $60 billion at the end of 2000 before it imploded following an accounting scandal and stock investors were wiped out, according to research from Harvard Business School professors Paul Healy and Krishna Palepu. That means Apple investors have lost four times more in paper losses than investors lost in all of Enron stock. Doradla points out, however, Apple created much more stock wealth during its ascent than Enron, too.
“Apple created six to seven times more in equity value than Enron ever created, so comparing dollar amounts of decline (is) probably not fair,” says Tavis McCourt, analyst at Raymond James. The other big difference is fraud and faulty accounting triggered the decline in Enron and resulted in the company becoming the sixth largest bankruptcy in U.S. story, says BankruptcyData.com. Apple is a perfectly sound company, on the other hand, and has $233 billion in cash and investments. “What Buffett’s and Icahn’s investment before him show is that Apple’s historic valuation creation over the past decade is built on a solid foundation of cash flow, with an outlook that many reasonable people conclude can continue to grow over the long term,” McCourt says.
* Ranking among biggest wealth destroyers. The $240 billion lost on Apple makes it the fourth largest market value loss among current members of the Standard & Poor’s 500 from their all-time highs to now, according to a USA TODAY analysis of data from S&P Global. Cisco Systems (CSCO)’s $419 billion loss from its dot-com bubble top on March 27, 2000 remains the largest amount lost. But Apple’s loss even exceeds that on Exxon Mobil (XOM), which has taken a hit from the implosion of oil prices. Shares of Exxon are only down 13%, or $71 billion, from its all-time high in July 2014.
* Depressing the Dow. Apple has been an unwelcome drag on the Dow Jones industrial average ever since it was added March 19, 2015. During that time, Apple has dropped 26% while the company it replaced, AT&T (T) has jumped 16%. Apple’s anchor is a big reason why the Dow is down more than 2% since March 2015, with the stock accounting for about a fourth of the Dow’s point loss since joining the average.
* Recalling past bubbles. It’s difficult to compare the Apple implosion with other manias since it’s one company while the Internet bubble was characterized by hundreds. But the amount of money lost on Apple’s stock is 20% of the $1.4 trillion value of the Internet bubble near its peak, measured by the USA TODAY Internet 100 on March 2000 of the 83 members with valid historical data. It’s important to note that unlike many Internet companies, Apple is highly profitable unlike many dot-coms which imploded. Apple reported a profit of more than $50 billion over the past 12 months.
Investors can’t deny the size of the losses, but many analysts insist it’s an opportunity not the start of something worse. The average analyst thinks Apple’s stock will be trading for $124 a share in 18 months, which is 31% potential upside. “Its not the first time (Apple stock has) been this inexpensive relative to near-term earnings,” McCourt says. “When this last occurred, the optimists were duly rewarded.”
Follow Matt Krantz on Twitter @mattkrantz
LARGEST MARKET VALUE DECLINES FROM ALL-TIME HIGHS*
Company, Symbol, Lost from all-time high to now ($ billions)
Cisco Systems, CSCO, $418.2
Intel, INTC, $354.9
General Electric, GE, $324.1
Apple, AAPL, $236.2
Microsoft, MSFT, $211.4
Source: S&P Global Market Intelligence, USA TODAY
* Based on intraday highs