Apple has taken a beating at the hands of investors over the past few weeks, ever since the release of its quarterly results on 21 July.
The fundamental factors surrounding the much maligned stock suggest that investor sentiment may be unfounded. Analyst Garrett Patten says that Apple is still cheap with a P/E ratio which is less than 86% of the stocks that comprise the S&P 500 index (SPX). The company also sits on a cash reserve which is bigger than the Greek GDP. Investors appeared to be more focused on the potential negatives around the Apple Watch and Apple Music rather than on the excellent results that Apple delivered.
History repeating itself in respect of Apple seems to be very much the case following a detailed technical analysis of the performance of the company’s stock.
Apple (AAPL, +0.22%) has been through these sort of doldrums before if one looks back to January when the stock was as low as $107 and hit $132 in May as investors rued a missed opportunity. The stock closed at $132.07 on 20 July, the day before the results were released and has been falling back steadily since then to be at the $115 level on Thursday, a drop of around 12% in that period.
Based on technical analysis, the current decline in the price could again be the forerunner to another prelude to a run which could reach record highs early in 2016. Patten says the stock should have a target level of between $143 and $157 while the bottom should be in the $110 to $105 range before it will turn back for the start of the next rally. He has the view that a break back above the 200-day moving average would indicate that the price has already bottomed.
Apple's current woeful performance was aggravated on Wednesday when Bank of America Merrill Lynch analysts downgraded the stock, expressing concerns of a potential slowdown in sales volumes of the company’s products in China.
Bloomberg reports that Katy Huberty, Jerry Liu and Elizabeth Elliott, all Morgan Stanley analysts, have a very different opinion regarding Apple stocks. They believe that any potential slowing of sales in China indicates a degree of caution, but are largely being overestimated. While they do expect a degree of headwind for Apple products on the Chinese market, the analysts forecast continued growth in the demand for high end smartphone sales. Morgan Stanley has a target price of $155 for the stock.
The headline to the Bloomberg article might say it all, “Morgan Stanley: This Is Your Last Chance to Buy Shares of Apple at a Discount.”