Can Apple Really Go to $260?
This is the biggest question on everyone's mind. When there are analysts reporting to Yahoo Finance that the new high target is actually $700 a share, people begin to think how their lives will change when Apple (AAPL) stock almost doubles. However, there is a major downside to this bubble. That is the low target of $260 a share, which is more than $120 a share lower than the current price of $388.
|No. of Brokers:||48|
Many analysts are looking at the charts and seeing a major bearish pattern. Tomi Kilgore of WSJ.com noted:
The stock was down 0.5% at $383.19 in afternoon trading on Friday. There should be support within the $355-to-$365 range, which has acted as a pivot level–first resistance, then support–since February. In addition, the key 200-day simple moving average, which many chart watchers view as a dividing line between longer-term uptrends and downtrends, currently extends to $363.
If that area breaks, the downside targets will become the June low at $310.50.
The Moving Averages show it dipping below the 50 day MA of around $400. Is this a bearish signal or just an insignificant dip?
Last month BGC Partners downgraded Apple to hold from buy:
Apple Inc. received a rare downgrade on Monday, a day before the most valuable company in the United States is due to report fourth quarter earnings.
Colin Gillis, technology analyst at BGC Partners, cut his rating on Apple shares to Hold from Buy, telling clients that the near-term downside risk outweighs upside reward.
Most analysts at Barron's recommend it as a buy with 4 holds. Their Stockgrader gives it a score of 85.9 (buy) with a grade of D for Earnings Impact, and an F for Market Value. They also show a book value of $82.45 a share.
And there is more bad news for Apple. Last week there were numerous reports that the battery problems in the new iPhone 4S have not been corrected. Jared Newman from PCWorld reported:
Apple says it's still investigating battery drain issues with the iPhone 4S after some users complained that the iOS 5.0.1 update didn't solve their problems. But now Apple is facing new gripes that the iOS 5.0.1 update is causing more problems with the iPhone 4S including; microphone failures, Wi-Fi signal loss, and cellular network reception issues, according to reports.
But a more significant problem is the competition for the iPad. As SA writer NakedValue pointed out:
Sure, consumers get what they pay for and many will agree that Apple still has the world's best tablet device, but the price differences between the Amazon and Barnes & Noble tablets with the iPad are too large to ignore. The Fire tablet sells for $199 and the NOOK tablet sells for $249. Both are 7" tablets with no front facing camera and as such, they should not be viewed as perfect competitors with the iPad but it is impossible to ignore a large overlap in potential consumers.
I would also add that some people actually consider the smaller size of the FIRE and the NOOK to be an advantage over the iPad. But is all of this enough to cause Apple's stock to tumble? Could it actually go down as low as $260 a share? Let me offer one more little problem. From Filip Truta of Softpedia:
In the wake of several executives leaving Apple, the Cupertino, California based company is awarding those who are sticking around with $60 million bonuses each.
These include seven Apple executives that will get $60 million each, one that will get $100 million (CEO, Tim Cook), and one that will get an undetermined amount due to lack of SEC Regulation concerning disclosure (due to his job level). So we know the total is at least $520 million. To me this is very bad timing for the company. My first impression is that since Steve Jobs is gone, they are rewarding themselves - at a time that the company is having some major problems.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.