Apple stock price up while sales fall

It seems almost like perpetual motion or levitation when a company’s sales are down but its stock price rises, yet that is exactly the trick that Apple seems to have pulled off after the first quarter of 2009.

This week, Gartner Research released a report showing that the Apple share of the PC marketplace had fallen to 7.4 percent in the first quarter of 2009 after having topped 9 percent late in 2008. That would generally seem to be some reason for concern and lead to a falling share price, but that did not happen with Apple, according to a Fortune blog. Instead, it’s price rose almost 2 percent the next day, closing at a six-month high at $121.45.

The answer to this conundrum is easier than you think. The Gartner report points out that the sales of Apple’s competitors are being driven by the new, low-cost netbook computer class, small inexpensive notebook computers made to connect to the cloud. It turns out that this is true among education and professional buyers as well as nickel-squeezing consumer shopper, so the effect is widespread. This has caused the average selling price of a PC computer to take a huge tumble. Gartner estimates that the netbook may have caused average computer prices to fall by as much as 20 percent, causing a significant drop in revenues from PC computer sales.

Apple, however, has so far stayed out of the netbook arena and has thus avoided the precipitous drop in average sales prices. Therefore, while its number of sales may be down, it’s revenue may well be steady or up. Of course, rumors abound that Apple is going to introduce a smaller computer in the near future, but no one expects that it would be offered at a bargain basement price if it actually arrives. The end result is that Apple’s market share may be falling, but its margins and gross revenue have likely done much better that similar measures for the competition.

So it is possible for decreased sales to be, if not a good thing, at least not a bad thing. When this situation is combined with very strong iPhone sales and the introduction of new iPhone models soon, it becomes easy to see why the investors view of Apple remains rosy.

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