Stock market, there are a number of factors that will have an impact on share prices. This is because of perceptions about: future prospects for the company and the effect of new products / services on the earnings per share. In the case of Apple, the stock fell from $205.94 to $192.06. This was in response to the firm announcing the introduction of the I Pad. What makes the situation so troubling; is this was an eagerly anticipated announcement for a series of innovative products. Yet, investors were not enthusiastic on the news (which led to the selloff). To fully understand what is happening, there will be a focus on why the price of the stock fell. Once this takes place, is when specific insights will be provided that is showing if this was a systematic or an intrinsic move.
Why would the price of AAPL fall just when the company announces an exciting new product?
The reason why Apple fell was based upon systematic and intrinsic factors. The systematic issues are surrounding fears that the economy was about to slowdown. This is from: a reduction in government spending (i.e. The stimulus program), concerns about profit margins, a stagnant consumer, weak housing prices and the renewed possibility of a double dip recession. The combination of these factors caused the stock market to sell off. ("Apple I Pad Sends Stock Down," 2010)
As a result, Apple experienced similar concerns when they introduced the I Pad. This is because the weak economy could reduce demand for portable electronics. If this were to happen, Apple could face declining earnings. This caused some worries about if the price of the stock had climbed to fast (which resulted in the selloff). In this aspect, one could argue that systematic factors were affecting the viewpoints of investors. ("Apple I Pad Sends Stock Down," 2010)
Moreover, the declines in the price of the stock were based upon intrinsic factors. This is occurred with investors already knowing and anticipating the launch of the I Pad. What happened is prior to the announcement, rumors begun to surface that Apple was set to introduce another innovative product. This caused the price of the stock to rise in anticipation of the news. Once it was announced, is when investors began to wonder how the company would reach out to customers. These factors are what caused a selloff in the price of the stock based upon a host of unanswered questions. (Hernandez, 2010)
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