A Mixed Bag Of Competing Considerations From Fundamental To Technical AAPL
Apple (AAPL) stock is behaving badly. Its quantitative fundamentals are strong and attractive. Thematic/operations issues are a mixed bag.
For the moment, at least, the bloom is off the rose.
Declining Analyst Price TargetsWhile only modest, average analyst 12 month price targets are declining.
Figure 1: Price vs Analyst Price Targets(click to enlarge)
The Hold, Underperform and Sell recommendations are a small minority of the 50+ Apple analysts covered by ThomsonReuters, they have increased slightly.
According to ThomsonReuters the current analyst breakdown is:
BUY 27OUTPERFORM 22HOLD 5UNDERPERFORM 1SELL 2For the current 57 analysts, the average target is $756 which is about 48% above today’s current price of about $511 (mid day). There is a negative outlier target of $270, and positive outlier of $1,113.
Today, UBS dropped its target from $780 to $700, due in part to a lackluster opening day for iPhone 5 in China. Reportedly, only 2 customers were waiting at the Beijing store before the open to buy the latest iPhone 5 on its launch today.
Stock Behaving BadlyThe stock price has “violated” some thresholds that technical analysts believe are important.
Because of the one off December 2012 selling season based on certain to be higher combined state and federal capital gains tax in 2013, it is probably not reasonable this month to have as much confidence in technical factors as in other periods.
That said, Apple as of this morning at $511 was off 27.5% from its all time $705 high in September 2012. On top of that large decrease, the price pattern is not michael kors outlet encouraging.
The rally that began in November and peaked in September did not even recoup 1/2 of the decline from the $705 September 21 peak to the trough $505 Low / $527 Close on November 16. A retracement failure at less than 1/2 of the prior price decline is typically a bad sign.
Further, after the rally failure, the price is now in the middle of that prior trough day Low/Close range. On May 18 there was another low at $522 Low / $530 Close. Typically, technically oriented traders / investors would view that approximate $510 to $530 level (shown in Figure 1 below) as an important support level. If that support cannot hold (and is penetrated for more than a transitory moment), they would expect a material decline from there.
Additionally, the price fell below the 200 day average in September, and then failed michael kors outlet in its November rally at the 200 day average level, which visually acted as resistance.
The 100 day and 200 day average are no longer pointing upward.
Figure 2: Apple Price Chart(click to enlarge)
On a slightly more positive tack, Apple has declined 20% or more from its 1 year trailing high 6 times (including this time) from the end of 2005 to now. That averages once per year.
Here are the time frames and prices:
Jan ’06 ($86.40 Hi) to Jul ’06 ($51.41 Lo)Jul ’07 ($148.92 Hi) to Aug ’07 ($111.62 Lo)Nov ’07 ($192.00 Hi) to Feb ’08 ($118.09 Lo)May ’08 ($191.45 Hi) to Jan ’09 ($78.20 Lo)Apr ’10 ($272.18 Hi) to May ’10 ($199.25 Lo)Set ’12 ($705.07 Hi) to Nov ’12 ($705.75 Lo)Today came close michael kors outlet to the Nov ’12 low by hitting $507.66, as of this mid day writing (2012/12/14).
There is one other very special and non recurring thematic issue a new and higher tax schedule for 2013. Whether rich or not, most investors are likely to experience higher taxes in 2013 between state and federal obligations. It is unfortunately not possible to know how much of the gut wrenching drop in the Apple share price is due to tax related sales.
This is how Business Insider described the situation on December 12:some investors are likely taking the opportunity to lock. gains michael kors outlet while paying today’s low capital gains tax rates.Apple recently (spent everything it had) from a product launch perspective, and analysts aren’t expecting anything truly exciting to happen until next summer at the earliest.Apple’s amazingly high profit margin is likely to decline over the next several years, as Apple’s product mix shifts toward lower margin tablets from the high margin iPhone and the iPhone margin itself declines with the introduction of lower priced phones. This suggests that earnings are likely to grow more slowly than revenue, in contrast to the situation for the past 5 years.
Apple’s next revolutionary new product a TV or TV device of some sort appears to have been postponed by a year. Analysts are also not sure what this product will be and how it will sell. Dozens of companies have tried to reinvent TV over the last 15 years, and almost all of them have failed.