Did the market know about Apple’s announcement?
On Tuesday March 6, Apple shares opened at $523.66. On Thursday March 15 — eight trading days later — they opened at $599.61. Which means that over the course of those eight trading days, the market capitalization of Apple increased by more than 70 billion dollars.
Let’s put that in perspective: the market capitalization of Molson Coors is $8 billion. The market capitalization of Staples is $11 billion. The market capitalization of Yahoo is $18 billion. The market capitalization of eBay is $48 billion. The market capitalization of Nike is $51 billion. The market capitalization of Goldman Sachs is $63 billion.
Apple isn’t just worth more than those companies. (In fact, it is worth more than double all those companies combined.) The point I’m making here is that if you take the amount that Apple was worth on Thursday morning, and subtract the amount that Apple was worth eight days earlier, the difference is more than the total value of any of those companies, up to and including Goldman Sachs.
To a first approximation, there was no news about Apple that emerged over the course of those eight days. The only real thing we learned was that the new iPad had sold out, which, well, would have been more surprising if it hadn’t.
Now, however, there’s news — real, market-moving news, about what Apple’s going to do with its $100 billion or so in cash. As Chris Tolles drily puts it, that news is evidently “so huge that it propagated backwards in time”.
Apple stock closed on Friday at $585.57 per share, after a run-up all but unprecedented in the history of mega-caps. Back in November, when I was remarking on how cheap Apple seemed, the stock was $363 per share; since then it has added $208 billion in market cap. That’s more than the valuation of Google. So one way of looking at the crazy price action of the past couple of weeks is to chalk it up to the astonishing power of momentum.
Alternatively, you could just say that the stock market has been slow to price in what has been clearly evident since February 23, when Apple CEO Tim Cook said at the company’s annual meeting that Apple has more money than it needs, and that he and the board were nearing a decision about what to do with it.
But still, it is a little bit suspicious that Apple’s big announcement is coming immediately after one of the largest and fastest rises in market capitalization that the stock market has seen since the dot-com bust. Or even during the bubble, for that matter. Look at Apple in the famous context of Amazon. On December 16, 1998, when the stock was trading at $242, Henry Blodget put a price target of $400 on the company. On January 6, 1999, Amazon hit $400. Amazon had grown its market capitalization by $13 billion in 14 trading days, which means that its market cap was increasing at a rate of just under $1 billion per trading day. If you look at those eight days of Apple trading, by contrast, the company’s market cap was increasing at a rate of $8.9 billion per day.
Given how unusual it is for a company to see its capitalization rise so astonishingly quickly, it’s reasonable to raise an eyebrow at the timing here. On Monday, Apple will make its announcement, and the stock will rise, or it will fall. But if it falls, that won’t necessarily mean that the market is disappointed in what Apple is announcing. It might just mean that the announcement got more than fully priced in, over the course of the past couple of weeks.