The Apple (AAPL) Has Fallen From the Tree

Shares of Apple (AAPL: Charts, News) dropped over 6% yesterday, continuing the company's 20% slide since hitting an all-time high north of $700 per share three months ago. Although the stock staged a modest recovery over the past month, after sliding to $507 on November 16, shares are still extremely volatile and dominated by both bullish and bearish short term traders.

Over the past month, short interest in Apple has risen 34% and continues to increase as the share price plunges. Although the stock is fundamentally sound, trading at a mere 9.5 times forward earnings, it faces severe technical hurdles - most importantly a head and shoulders pattern that could lead to a steep plunge ahead, if the stock fails to muster the strength to challenge $700 again. Daily Chart
Apple's recent weakness hasn't discouraged some bullish analysts. CNBC's Jim Cramer noted that Apple should easily reach $605 per share in the near term. Cramer noted "breakout products" and "off the charts" sales for the iPad Mini contradict the "conventional view about what's happening under Tim Cook's regime." Cramer asserts that Tim Cook is a supply-chain side innovator despite his "stuffy reputation." Other bullish analysts believe that Apple has the potential of becoming a massive mobile payment provider to compete with the likes of eBay's (EBAY: Charts, News) PayPal, Visa (V: Charts, News) and Mastercard (MA: Charts, News). Bulls also point to Apple's mobile apps, which are still widely considered to be higher quality than those available from Google's (GOOG: Charts, News) Android apps, Microsoft's (MSFT: Charts, News) Windows Marketplace and Research in Motion's (RIMM: Charts, News) Blackberry App World. Bulls also love Apple's growth potential in China, which are "only beginning their upward arc." Bears paint a different picture of Apple's growth potential without Steve Jobs. Apple recently hit a roadblock in China after disagreements regarding its iTunes sales slice with China Mobile (CHL: Charts, News) - the country's largest mobile service provider. Apple's iPhones also may need to be modified to suit the country's ongoing battle between the SCDMA and WCDMA network protocols. To date, no deal between the companies has been announced, although it is expected that Apple will need to partner with China Mobile in order to advance into the mainland. The other major threat is South Korea's Samsung, which stole the iPhone's top spot among smartphones with its flagship Samsung Galaxy S3 last month. Apple has been striking back at Samsung with endless litigation, and Samsung has counter-sued numerous times. Yet no end seems to be in sight for the legal battles between the two companies. Samsung's threat is so massive that Apple was forced to partner with Taiwan-based HTC - a former Android rival - to agree on a global patent partnership for the next decade. Ironically, Apple had sued HTC for 20 patent violations only half a year ago, and attempted to block sales of its handsets in North America. Nokia - which had been left for dead by consumers and investors - also made a surprising comeback during the holiday shopping season with strong sales of its newest flagship Lumia series. Research in Motion - another battered rival - also announced that its Blackberry 10 models would be available by January 2013. Nokia remains strong in emerging markets and among lower-end handset users, while Research in Motion remains the top choice of business enterprise users. Samsung, Nokia and Research in Motion are all growing in strength as Apple's power is notably waning. Lastly, Apple's iPad line has dominated the tablet market over the past year and upset a large number of PC manufacturers, such as Dell (DELL: Charts, News) and Hewlett-Packard (HPQ: Charts, News), with its disruptive technology. However, Amazon's (AMZN: Charts, News) low-priced Kindle series and Google's Nexus tablets are chipping away at Apple's dominant market share. Their low price has appealed to many first-time tablet users and those looking for a simpler, lower powered tablet for media consumption. Apple is still unquestionably strong, with over $120 billion in cash reserves, but the future remains murky for a company still feeding off a product cycle created by the late Steve Jobs. Tim Cook has introduced a dividend of $2.65 per share - a 1.93% yield at current prices - to appease anxious investors, but until Cook introduces the next great product, a long shadow still looms over the company that Steve Jobs resurrected. Other News About AAPL Implications Of Apple Inc. & Intel Corporation Break-Up Does a messy divorce between Apple and Intel benefit Arm Holdings? Apple Inc. Launches iTunes In India & 55 Other Countries Today Apple spreads iTunes into more markets. Other Stocks in the News Netflix, Inc., Research In Motion Limited: 5 Takeover Targets Loved By Hedge Funds Will these companies be taken over in the coming year? Oracle Corporation To Pay 2013 Fiscal Cliff Dividend Oracle becomes the latest company to pay a dividend to appease anxious investors. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Dec 6, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

Posted in ...