Is Apple Smarter Than The Stock Market?

STOA day after the tech giant unveils its new line of products, the fact that its stock is down actually signals good news to come.

Apple?s shares continued to underperform on Thursday, despite analysts? reasonably relatively positive reviews for products that the tech giant unveiled on Wednesday. Apple?s stock is hovering around the $112 per share mark even during upticks ? a far cry from the $130 per share range it traded at for most of the first half of 2015 or its 52-Week High of $134.54. Nothing seems to get the stock back up anymore, even a new iPhone.

This isn?t unusual, however, if you look at Apple?s history. On past product launches, Apple ?AAPL 2.08% ?saw modest run-ups in its stock right before the events, followed by a decline right after as analysts inevitably felt disappointed due to inflated expectations and took time to absorb the new offerings. This week?s event seemed to follow the same pattern, more or less.

This should actually help Apple, whose stock has skyrocketed recently due to extreme hype, to keep its price, and Wall Street expectations for the future, in rational territory. That in turn will make it easier for the company to beat market estimates at the end of this year if its latest devices do well, as happened with the iPhone 6 during the last quarter of 2014. In that instance, even though expectations were still high, Apple?s performance was significantly higher. Managing expectations will also help Apple circumvent the trap it fell into for the iPhone 5s, when sales couldn?t match Wall Street euphoria and hurt its shares.

As proof that there is currently a mismatch between Apple?s likely performance and its market value, many leading analysts have already weighed in with aggressive price targets for the company ranging as high as $175 per share.

Think of it as a spring being pulled back. The less investors expect from Apple, the more likely they are to be positively surprised when the company delivers strong sales on its latest products, particularly the iPhone, and to buy more stock. By contrast, a bull market for Apple now would have nowhere to go but down, as we have seen in the last few months. Hype has long been one of Apple?s best friends but can also be its worst enemy when it veers too far from reality.

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