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NEW YORK (Dow Jones)--Apple Inc. (AAPL) shares fell as much as 6.5% Tuesday, erasing up to $20 billion in market value, after the consumer electronics maker disclosed that Chief Executive and company visionary Steve Jobs would take another unexpected medical leave.
The decline, however, is more moderate than its retreat on Monday during overseas trading--the U.S. market was closed--suggesting that investors are focusing instead on the company's upcoming quarterly earnings report and growth prospects.
"While this creates uncertainty, we believe the product pipeline is set for the next two years and Apple's bench strength has come through before," said Peter Misek, an analyst for Jefferies & Co.
After the initial sharp decline Tuesday, Apple shares rebounded, recently falling 3.7% to $335.63. Based on that price, the stock remains up 4% this month from its 2010 close of 322.56 and the company carries a market cap of about $308 billion, keeping Apple as the world's most valuable technology company.
Few CEOs have been as closely linked to their company's success as Jobs has, and some say his presence is reflected in Apple's stock price. Others, though, argue that any such premium was washed out during his last leave two years ago, and that the stock's surge since January 2009--shares have nearly quadrupled--is based on the company's strength in the market and balance sheet.
Jobs's leave comes as the stock ended on another all-time high Friday. Apple shares, up 66% over the past 12 months, have rallied due to the success of its iPad tablet, expectations surrounding the Verizon Wireless iPhone and increased sales of its Mac computers, which last week were named the fastest-growing PCs in the U.S.
Evidence of Apple's recent success is expected after the bell when the company reports its fiscal first-quarter earnings. Analysts, on average, expect Apple's per-share earnings to rise 47% to $5.40 as revenue increases 56% to $24.43 billion, according to Thomson Reuters.
The 55-year-old's leave shouldn't derail the company's current momentum, analysts say, but could have longer-term implications.
"Jobs's absence should have no material impact on Apple's financial performance over the next several years," Needham analyst Charlie Wolf said. What Apple loses during the leave "is the ability to redefine markets and industries going forward--in short, the option value of future innovations."
Goldman Sachs analyst Bill Shope recommended buying on any weakness because the long-term fundamentals remain intact. He said Apple's multiple of 15.1 times earnings "already represents a significant historical discount, and we see no direct risk to earnings from this move."
Shope, who reiterated his 12-month target price of $430, also said "Apple's $51 billion in cash and investments could be partially distributed to shareholders to stabilize the shares."
The leave marks the third time in the past decade that Jobs has been forced to step back from his role at Apple. He took medical leave in 2004 and then again in the first half of 2009, returning to the company in late June of that year. Jobs, a survivor of pancreatic cancer, received a liver transplant while on leave in 2009.
In his absence, Apple Chief Operating Officer Tim Cook will run the company. Cook, 50 years old and a longtime lieutenant, ran the company during Jobs's previous leaves. Analysts don't expect any major changes under Cook, who has seen as an executive focused on operations.
"We could see changes to more mundane corporate issues such as a dividend policy as we believe Jobs was the most vocally opposed," Jefferies' Misek said.
In May, Apple surpassed Microsoft as the most valuable technology company, capping a rise for a stock that hit a low of $3.19 in December 1997 and a more recent bottom of $6.36 in April 2003, according to FactSet Research. The historical share prices are adjusted for Apple's 2-for-1 stock splits in 2000 and 2005.
"The major risk in the Apple story is Steve Jobs's heath," Needham's Wolf said. "Risks arising from the competitive landscape pale in comparison."