Tim Biggam, TradingBlock (May 17, 2012, 3:19 pm CDT)
|Symbol||Analyst Target Price||Target Date|
|AAPL||560.00||July 20, 2012|
Apple Inc. (ticker: AAPL), together with subsidiaries, designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players; and sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide.
The drubbing in AAPL shares continues seemingly unabated, with the shares trading under 540 for the first time since March 6. Since earnings on April 24th, the stock has been down 11 out of 15 days, falling 12% from 610 to 537. AAPL now has a dividend yield of nearly 2%, eclipsing the yield on the 10-year government bond by 25 bps (basis points). Much of the recent sell-off is due to cash-raising by hedge funds, with AAPL being seemingly every fund's largest holding.
Given that AAPL shares now fetch only a 13 P/E on a trailing basis, and under 10 on a forward basis, combined with a nearly 2% yield, I think AAPL is reaching a valuation level that will get some institutional support. I look for AAPL to head to 560 by July expiration.
Play of the Day
Based on Apple's (ticker: AAPL) current market price of $530.12 and using a target price of $560.00, a target date of July 20, 2012 and $10,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.
Click on the strategy name below to access trade details using TradeBuilder on TradingBlock.com. Powered by TradingBlock's TradeBuilder.
|Strategy (click for details)||% Return at Target||Probability of breaking
even or better
|Buy Sep Call Spread||+96%||51%|
|Sell Sep Put Spread||+85%||48%|
|Buy Sep Call||+23%||52%|
* Click link to access TradeBuilder details on TradingBlock.com. Must have Instant or Actual account. Subject to change due to changing market conditions. Click here to view risks regarding selling stock short.
DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services. Tim currently holds neutral spread positions in AAPL.