Apple stock today plunged on yesterday's news that CEO Steve Jobs is taking a leave of absence to focus on his health. Apple stock was down almost 10 percent in Germany and as much as 6 percent on the NYSE at the opening bell Tuesday.
Shares of Apple hit an all-time high ($348 per share) over the past week on Verizon Wireless' announcement that it would be getting a CDMA version of the iPhone 4, as well as rumors of an impending iPad 2 release.
The stock drop and news of Jobs' absence come just ahead of Apple's earnings call, which will be held after market close today. Bullish analysts defended Apple stock in notes yesterday.
Gene Munster, analyst for Piper Jaffray, maintained a $438 target for Apple stock. Maynard Um, analyst for UBS, adjusted expectations for quarterly iPad sales, bumping estimates from 5.5 million to 6 million in sales, reasoning that this is the first quarter of iPad sales that has been free of supply issues.
Apple's ample cash reserves have been a point of contention as of late. The company currently boasts $51 billion in net cash. Brian White of Ticonderoga Securities maintained a "buy" rating on Apple stock, as well as a $450 price target. White says Apple would be wise to use some of its cash now for a "significant stock repurchase or a generous cash dividend."
While Jobs' absence may have an immediate effect on Apple's stock, the company pulled through a similar situation back in 2009, when Jobs left on medical leave in January to have a liver transplant and return in June. Apple shares fell almost 7 percent following that absence but continued to rise throughout the rest of the year.
It's worth noting that Apple's COO, Tim Cook, was appointed interim CEO during Jobs' last health-related leave. This time Apple did not give Cook a formal title change. In his email to employees yesterday, Jobs maintained that he would continue to be involved in all "strategic decisions" going forward.
The importance of Jobs' vision at Apple cannot be underestimated, according to Walter Piecyk of BTIG Research. "We are believers that one person, particularly the CEO, can make a material difference in an organization, whether that difference is for the good or the bad. In any organization, the tone is set at the top," Piecyk writes in a blog post.
Piecyk says that today's early morning selloff is to be expected but maintains that tonight's impending earnings call will put things into perspective. He also believes that Jobs influence is enduring.
"We believe Jobs has installed a winning culture and a focus on quality that will have a lasting impact at Apple whether he returns or not. More specifically, product roadmaps are not developed overnight. Jobs' product decisions and direction will be felt for at least six quarters before investors have to worry about the decisions made by any replacements, but a stock like Apple might look out at growth estimates beyond six quarters," Piecyk writes.