Apple released its long anticipated 4th quarter earnings last evening. In the words of Apple CEO Tim Cook, "No technology company has ever reported these kinds of results". Everybody should have followed my blog advice last fall to buy Apple stock when the iPhone 5 came out, and you'd be rich by now. No wait, I didn't recommend buying Apple stock at that time. And if you did buy Apple stock at the time you would have lost your shirt and your pants, too. You see, Apple stock was $640 a share at the time, and yes it did reach $700 per share for a brief time shortly thereafter. But since then Apple stock has been falling like a rock, down today another 50 points to its present level of $455.
As I stated before, you can't buy stock in a company merely because you like the company, they make great products, and you think the company will make a lot of money. The reason is that a company's stock needs to be evaluated with reference to its current price valuation. How can you say Apple stock is a good buy today if you don't know if the current price is 200, 700 or 1000? Yes, Apple appeared to be on top of the world when the iPhone 5 came out and the stock was $700, but that $700 value carried a market expectation of sales volume that turned out to be overblown. Of course, at the time analysts were confidently predicting a quick rise to $1,000 a share. I wonder where those analysts are today.
On the flip side, I also mentioned that despite the pounding that Facebook stock had taken down to $20 a share from its high of $40 and its highly tarnished image, that it could possibly be a worthwhile buy at that price. And while it did fall a couple of dollars lower, it has recovered nicely to $31. So this proves again that you can't buy stocks in a vacuum. Of course, maybe now it's time to buy Apple. But be wary of the old stock market saying "Never try to catch a falling knife."