Today: With its annual developers conference ahead Monday, Apple follows its pattern of gaining ahead of the event, which should feature a host of software updates. Also: Infoblox and Splunk plunge after earnings reports.
The Lead: Apple heads into WWDC with soaring stock price -- again
Apple stock has soared to its highest prices in years ahead of Monday's kickoff of its annual Worldwide Developers Conference in San Francisco, but history suggests that those prices could come down after the company shows off expected new software developments.
Apple shares gained 7.2 percent in the month of May, despite ending the month with a 0.4 percent decline Friday at $633. The company announced a stock split in April that will take place on June 9 and this week confirmed the largest acquisition in its history, the $3 billion purchase of Beats Electronics.
The gains ahead of Apple's annual event are nothing new, as BTIG Research analyst Walter Piecyk pointed out in a note Friday: Apple has gained an average of 4.1 percent in the month leading up to WWDC in the previous six years, but has fallen or failed to move on the day of and day after the event in each of those years, with average declines of 1.4 percent and 1.5 percent respectively.
"However, this time around there doesn't seem to be high expectations for any major new product releases," Piecyk noted in his report. "Maybe that could enable Apple to break its six-year streak of selling off the day of and day after the WWDC conference."
The pre-WWDC gains were bigger in earlier years, when Apple introduced new iPhones during the WWDC keynote, a practice that ended with the 2011 event as iPhone debuts moved to their own schedule. WWDC has since become a platform to show off new software advances from the company, which is of importance to the developer community to which the conference caters.
That fact isn't keeping analysts and journalists from predicting big things at the event, however, which could be driving Apple's gains.
"While Apple's software-only events have rarely captured the same level of excitement as its hardware launches, we believe this should change," Goldman Sachs analyst Bill Shope wrote in a Friday note. "Indeed, with the potential for substantial hardware differentiation and few new hardware categories that can substantially impact Apple's $175 billion revenue base, iOS platform differentiation is becoming increasingly critical."
Shope was one of several analysts to increase price targets on Apple stock this week, boosting the Goldman Sachs estimate from $635 to $720 and writing, "We believe the potential for substantial platform enhancements at WWDC and throughout this year should serve as positive catalysts for the stock."
Apple is expected to show off updated mobile and desktop operating systems, as it has done nearly every year since 2008, with the exception being the lack of an updated desktop system in 2010. However, the new features of those systems and other nuggets Apple will reveal remain secret.
According to a report earlier this week, Apple is planning to show off new software that will allow users to control many elements of their homes from their iPhones or iPads, which would be a big attempt to break into the growing "smart homes" sector. Similarly, there are expectations that Apple will begin showing off software advances in the "quantified self" area, which is focused on detecting and storing vital signs and other metrics related to users' health.
"We believe it is likely that we will see (1) iOS 8 preview and beta release; (2) the next version of OS X for the Mac, with a beta release; (3) Internet of Things sub-platforms (likely related to personal health and the connected home); (4) standard Mac refreshes; and (5) a more detailed discussion of the recent Beats acquisition," Shope wrote Friday.
For live coverage of the WWDC keynote address Monday morning, visit SiliconValley.com.
SV150 market report: Infoblox and Splunk tank after earnings reports
A quiet day on Wall Street didn't keep the Dow Jones industrial average from setting a record close Friday, but Silicon Valley tech stocks suffered a decline as two young companies tanked after announcing earnings.
Infoblox plummeted to its lowest prices in more than two years on the public markets Friday after announcing the impending departure of CEO Robert Thomas along with a disappointing quarterly financial performance and forecast. The Santa Clara network security company, which went public at $16 a share in April 2012, fell 36.8 percent to $12.96 Friday as at least eight analysts cut their price targets, with five of them downgrading the stock. "The prospects for this promising new growth company have turned sour," Pacific Crest Securities analyst Brent Bracelin wrote, while UBS analysts commented, "Perhaps the most disappointing development was CEO Robert Thomas announcing his resignation."
San Francisco software company Splunk's earnings report continued to show the sales growth that led it to a big IPO just a day before Infoblox's, but the company's forecasts upset analysts and the stock crumbled. Splunk fell 16.4 percent on the day to $41.86, with even bullish analyst reports admitting to being "nervous as heck" after the results.
Facebook declined 0.8 percent to $63.30 after CEO Mark Zuckerberg and his wife announced that they would donate $120 million to Bay Area schools in low-income areas, the second such gift after a $100 million donation to help schools in Newark, N.J. Google gained 0.2 percent to $571.65 while firing up the process for Europeans to request removals of certain information on its search engine, which received requests at a rate of 20 per minute after it was activated. Twitter dropped 4.6 percent to $32.44, completing its fourth consecutive month of double-digit declines.
Up: Palo Alto Networks, Intel, eBay, Zynga, Electronic Arts, Netflix, Nvidia, Intuit, Google
Down: Infoblox, Splunk, SolarCity, Twitter, Juniper, Yelp, Pandora, Salesforce, Workday, LinkedIn, VMware, SunPower, Adobe, Tesla, Gilead, Facebook, Symantec, AMD, Yahoo
The SV150 index of Silicon Valley's largest tech companies: Down 6.93, or 0.47 percent, to 1,456.2
The tech-heavy Nasdaq composite index: Down 5.33, or 0.13 percent, to 4,242.62
The blue chip Dow Jones industrial average: Up 18.43, or 0.11 percent, to 16,717.17
And the widely watched Standard & Poor's 500 index: Up 3.54, or 0.18 percent, to 1,923.57