ExxonMobil fired an arrow through Apple's lofty stock price, knocking off the tech giant's claim of being the world's most valuable company.
Following a brutal week for Apple's stock, in which it crashed 12% amid a quarterly earnings report that disappointed investors, the value of the gadget maker crumbled to $413.1 billion. Apple is now behind oil firm ExxonMobil as the world's most valuable at $418.2 billion, a lofty perch Apple enjoyed for only a year.
The stock's 38% fall from its high is breathtaking, having destroyed $247 billion in shareholder wealth, which exceeds the value of IBM, at $232 billion.
It also deflated an Apple-stock bubble in which professional and individual investors loaded up, not wanting to get left out. Many are scrambling out, though, as it appears Apple's fast-growth days are over.
"When bubbles burst, it's kind of ugly," says Michelle Clayman of New Amsterdam Partners. "Everyone chases the stock (on the way up) if you get a pitter-patter of negative news, the stock suddenly pops and goes into free fall."
The crash of Apple's stock is significant in that it is:
Happening despite a powerful rally on Wall Street. Apple investors are sitting on a 17.3% loss this year, making it the worst stock in the S&P 500 so far. But the rest of the stock market is shooting higher without its fallen darling.
Eroding Apple's stranglehold on the markets. As the Apple stock bubble inflated, it not only became the most popular stock with investors but also commandeered several market indexes.
Apple accounted for 5% of the Standard & Poor's 500 index in September 2012, just shy of IBM's record of 6%, says Howard Silverblatt of S&P Dow Jones Indices. That weighting, though, is down to 3.2%.
Coming along with a precipitous fall in the company's results. While Apple bulls claim the stock's fall is unwarranted, that's missing the point that the company's growth rate is fast shriveling, says Walter Piecyk of BTIG, one of the only analysts who doesn't have a buy on the stock (he rates it a hold).
Analysts expect Apple's earnings to grow just 9% in the current fiscal year ending in September, says S&P Capital IQ, down from 63%, 84% and 54% in the previous years.
"When earnings growth slows that much," stock prices are affected as well, Piecyk says.
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