Why is Apollo Micro Sys falling/rising?

Short-Term Price Movement and Market Context

The stock has been under pressure over the past week, registering a 3.20% decline compared to a modest 0.20% gain in the Sensex. Over the last month, the fall has been more pronounced at 19.74%, significantly underperforming the benchmark index which declined by only 0.46% in the same period. This recent weakness is further highlighted by the stock’s three consecutive days of losses, accumulating a 5.37% drop in returns during this span. Intraday trading on 17-Dec saw the share price touch a low of ₹222.20, down 2.8% from previous levels.

Technical indicators reveal that while the stock remains above its 200-day moving average, it is trading below its 5-day, 20-day, 50-day, and 100-day moving averages. This suggests a short-term bearish trend despite a solid long-term foundation. Additionally, investor participation appears to be waning, with delivery volumes on 16-Dec falling sharply by 54.04% compared to the five-day average. Reduced trading volumes often signal cautious sentiment among investors, potentially contributing to the recent price softness.

Long-Term Performance and Fundamental Strengths

Despite the recent pullback, Apollo Micro Systems has demonstrated remarkable long-term growth. The stock has delivered a staggering 131.68% return over the past year, vastly outperforming the Sensex’s 4.80% gain and the broader BSE500 index’s 1.56% return. Over five years, the stock’s appreciation exceeds 1681%, underscoring its strong market position and investor confidence.

Fundamentally, the company’s operating profit has grown at an annualised rate of 35.76%, reflecting robust operational efficiency. The net profit surged by 90.91% in the most recent financial year, with the company reporting positive results for nine consecutive quarters. Operating cash flow reached a peak of ₹11.83 crores, while the operating profit to interest coverage ratio stood at a healthy 4.70 times, indicating strong financial health and debt servicing capability. The dividend per share also hit a record high of ₹0.25, signalling management’s confidence in sustained profitability.

Liquidity remains adequate, with the stock’s trading volumes supporting a trade size of approximately ₹1.58 crores based on 2% of the five-day average traded value. This ensures that investors can transact without significant price impact, although the recent decline in delivery volumes suggests some hesitation among market participants.

Balancing Short-Term Volatility with Long-Term Potential

The recent decline in Apollo Micro Systems’ share price appears to be a short-term correction rather than a reflection of deteriorating fundamentals. The stock’s underperformance relative to the sector and benchmark indices over the past week and month suggests profit-taking or cautious positioning by investors after a period of rapid gains. The drop in delivery volumes further indicates reduced investor enthusiasm in the immediate term.

However, the company’s consistent positive quarterly results, strong operating cash flows, and impressive profit growth underpin its long-term investment appeal. The stock’s ability to outperform the market substantially over one, three, and five-year horizons highlights its resilience and growth trajectory. Investors may view the current dip as an opportunity to reassess their positions in light of the company’s solid fundamentals and market-beating returns.

In summary, Apollo Micro Systems is experiencing a temporary pullback driven by short-term market dynamics and investor caution. Its robust financial performance and sustained growth prospects continue to support a positive outlook for the stock over the medium to long term.

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