Markets

Apple Stock's Big Gains Erode as Investors Rethink Earnings Report

By Conrad Aenlle

Updated on: July 20, 2011 / 10:01 PM EDT / MoneyWatch

Apple's stock (AAPL) had a big day Wednesday, the day after the company reported record profits and sales. It rose 2.67 percent to $386.90, another all-time closing high. As spectacular as it may seem, however, the price was substantially lower than the $404-plus that Apple reached in the initial pop after the earnings announcement.

The $17 pullback, or about $9 from the high in early trading on Wednesday, could be just a matter of backing and filling and nothing for Apple shareholders to worry about. The stock was below $357 less than five trading days ago, after all, and about $310 a month ago.

It is also possible, though, that Apple's subdued forecasts for earnings and revenues for the quarter that just started, which the company issued at the same time as its knockout numbers for the recently completed period, have curbed some investors' enthusiasm. Apple envisions a decline in earnings to $5.50 a share in the three months through September from $7.79 a share in the June quarter. Revenues are expected to fall to $25 billion from $28.57 billion.

Another alternative is that investors are thinking further ahead than the next few months. Perhaps they wonder how long Apple can continue to turn in extraordinary results in an industry with broader and deeper competition, an issue raised in a post earlier this week.

Apple's stock probably has too much momentum not to make fresh highs above $400. If it does, it probably makes more sense to sell at least some of your position if you're a shareholder than to buy the stock if you're not.