If History Repeats, Apple Shares Will Rebound Strongly in Steve Jobs's Absence

Apple CEO Steve Jobs's announcement that he's taking a medical leave sent the company's shares down in premarket trading Tuesday as expected, but if history serves as any guide, Apple investors may find the stock price doing well in his absence -- providing they can handle the pain of the drop long enough to enjoy the recovery.

That pain may take the form of a 15% decline to $300 a share, says Brian Marshall, an analyst at Gleacher & Co. Apple's shares appear headed down that path, falling 5% to $331.11 a share in premarket trading.

But historically, Apple's (AAPL) share price has recovered and excelled during Jobs's medical leaves of absence. And Apple's fiscal first-quarter earnings report, due after the markets close this afternoon, may soften the impact of the iconic CEO's health worries for shareholders.

The Fall and Rise of Apple Shares


Apple investors have experienced a Jobs medical leave two times in the past seven years. On Aug. 1, 2004, he announced he was planning to receive treatments for pancreatic cancer, and that Tim Cook, vice president of sales and operations at that time, would lead the company in his absence. Apple's stock fell 2.4% to $15.79 that day. But the stock soon reversed its fall, and by the end of the two-month period closed up 22.7%, or $19.34 a share. Its index, Nasdaq rose a mere 0.25% to 1,896.8 during that time.

Apple Stock

On Jan. 5, 2009, Jobs again announced he planned to take a medical leave, saying he expected to return in the spring. That news sent Apple shares down 4.2% to $94.58. Shortly afterward, Jobs issued an update that his return would take six months, and Apple fell 2.3% to $83.38 a share that day. But by the end of the six-month period, Apple shares were up 47.8% from their Jan. 5 levels to $142.43, while Nasdaq made a more modest gain of 12.6% to 1,835.04.

"We've seen weakness [in the share price] for the last two medical warnings," Marshall says. "The last one he issued, I raised my recommendation to a buy from neutral, and it proved to be one of the best moves out there. The stock was trading at around $80 a share then."

The most recent medical advisory, though, differs significantly from his previous ones: It provided no details about Jobs's condition, nor did it offer an estimate of when he expects to be back at work. Marshall says he gives Jobs a 50-50 chance of returning to Apple's executive suite.

"Obviously, this is a terrible thing for Steve personally, and the market reaction won't be kind either," Marshall says.

Coming Soon: Verizon iPhones and Upgraded iPads


Apple investors, however, may take comfort in the company's earnings, especially if they provide a bullish outlook going forward. The computer maker is expected to post a 46% jump in quarterly profits -- to $5.35 in earnings per share on revenues of $24.3 billion, which are expected to be 55% higher than year-ago figures, according to Thomson Reuters.

And going forward, Apple has its Verizon (VZ) iPhone deal lined up to take off on Feb. 10, which Wall Street expects to yield millions of new iPhone sales, plus an expected iPad refresh in the works. But spearheading those sales will be Tim Cook, who was promoted to chief operating officer in 2005 and has been Jobs's go-to guy during previous medical leaves.

"While Steve is a visionary, have no concerns Tim Cook can lead the troops," Marshall says. " Tim doesn't have vision like Steve, but Apple has others, like Jonathan Ive, who heads up their industrial design. He has vision." The question is: Will investors also have the vision to stick with Apple again?


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13 Comments

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vetnerz1

My hope is that STEVE JOBS will rebound strongly!

January 18 2011 at 5:57 PM Report abuse rate up rate down Reply
bunnyfunny47

"Ignorances is bliss"

January 18 2011 at 5:14 PM Report abuse +1 rate up rate down Reply
bunnyfunny47

Hope everyone is lining their wallets with aluminum foil today...Best be ready for card readers out scanning for peoples info as you walk by.

January 18 2011 at 4:55 PM Report abuse -1 rate up rate down Reply
bunnyfunny47

Maybe most of his workers can get together and take up a collection to ship his remains back to India for a fancy cremation ceremony along the Ganges River.

January 18 2011 at 4:48 PM Report abuse rate up rate down Reply
bunnyfunny47

I hope he croaks...Let the devil take whats his.

January 18 2011 at 4:37 PM Report abuse -1 rate up rate down Reply
mmmk

lets not pretend hes a good person just because hes dying, jeez he represents corporate evil. He got were he was by back stabbing skirting around copyright laws and employing sweat shop labor for all of apples products. Hes lucky idiots buy his shitty products.

January 18 2011 at 4:19 PM Report abuse +1 rate up rate down Reply
mmmk

Trendy idiots drive apples stock, It goes down when everyone realizes that the products apple is offering are just trendy expensive and less functional versions of superior technology. The fact that they continue to employ near-slave like labor in china cant help either.

January 18 2011 at 4:15 PM Report abuse -2 rate up rate down Reply
dick goesinya

Like his lack of battery replacement designs on all Apple's portible devices, his own personal battery has just about run out of juice. Yes, Job's, we can get along just fine without your junk. RIP, youngster.

See full article from DailyFinance: http://srph.it/dIJI0l

January 18 2011 at 3:07 PM Report abuse -2 rate up rate down Reply
nch24

I quess he is out looking to BUY another Liver
Too bad, the poor shnooks dying in Arizona don't have
the same pocketbook

January 18 2011 at 1:16 PM Report abuse -1 rate up rate down Reply
gritzsl

Jobs obviously has serious health issues. His continuing health issues are all related. He is doing a remarkable job of fighting his cancer but appears the cancer maybe winning. He has a remarkable ability to understand what people want and how to provide it. I doubt that Cook can provide that type of insight. He maybe a great manager but Jobs has insight. I am sure its true that APPLE has a number of projects in the works but without Jobs insight AAPLE becomes a more traditional technology company. For that reason if Jobs does not return within a short period the share price most likely will adjust backwards to a level that makes more logical. Without Jobs other technology companies should catchup with AAPLE rather quickly. A good example is Microsoft. Since Gates has left everyday operations the Microsoft has gone sideways. What ever one may think of Gates he has insight. The biggest threat to APPLE maybe Samsung. They have greater sales than AAPLE, and are now the leader in LED TV and 3D TV. Samsung can use this leadership in LED technology to develop products that interact with consumers on the big / little screen. Tie this technology into the mobile area and become the new AAPLE. AAPL is now a hold at best. The momentum is gone. One mans thoughts.

January 18 2011 at 1:06 PM Report abuse -2 rate up rate down Reply