A mass exodus of investors has been triggered by Apple Inc.’s (NASDAQ:AAPL) positive Q2 earnings report and upcoming stock split. The abrupt hike in Apple’s share prices to nearly $600 per share, after lingering in the doldrums closer to $500 per share for years, has been paralleled by an equal plunge in the share values of Facebook, Amazon, and Twitter. According to graphs published on CNN Money, investors are selling off their shares in the three named firms to raise cash in order to buy Apple stock, carried away on a wave of enthusiasm.
Market analysts have been puzzled as to why Facebook shares have dropped, considering that its Q1 earnings report was positive. There are other theories besides the “Apple effect,” of course. One of these is that the company’s price-to-sales ratio is too high, meaning that it must experience explosive growth if it is to retain share value over time. This is something that investors have been aware of for some time, however, so the sudden plunge may be explained better by Apple’s new-found strength than by Facebook’s potential future weakness.
Likely, several factors came together to cause the drop. There may well have been a body of Facebook investors who wanted out due to the price-to-sales ratio, but who had nowhere tempting to shift their capital to. Apple’s phoenix-like resurgence after its drab Q1 2014 performance gave them the opportunity, and the incentive to clear Facebook out of their portfolios, replacing it with shares of the Cupertino company.
The “clincher” that strengthens the idea that Apple’s success has come at the expense of three other notable tech stocks is that all three experienced the same drop in tandem with Apple’s rise. One or two could be a coincidence, but three stocks plunging sharply on the same day that Apple Inc. (AAPL) stock skyrockets in value is, at a minimum, highly suggestive that one set of stocks was sold off in order to buy another, more attractive one.
No doubt the enthusiasm of the investors for Apple (AAPL) will eventually wane, causing its shares to drop somewhat in value. Twitter, Facebook, and Amazon will regain some of their lost cache and start to attract both new investment and old investors who regretted their impulsive decision. But for the moment, the Cupertino enterprise is riding high on its newfound acclaim, trampling roughshod over its competitors as it gains value and attracts fresh cash to its coffers.
It will also undoubtedly emerge stronger than before, a formidable global company despite its many rivals and detractors.
