Apple Drop Sign of Peak? Value Investors Wouldn't Be Surprised – ValueWalk Premium
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Apple Drop Sign of Peak? Value Investors Wouldn't Be Surprised

Apple Drop Sign of Peak? Value Investors Wouldn't Be Surprised

As the Dow started the new week with a sell-off thanks to European political worries and a reduction by Kellogg Co. on its 2012 outlook, Apple Inc. (NASDAQ:AAPL) is on the rebound after hitting an intra-day low.

The stock is currently trading at $572.68, down 0.05 after hitting an intra-day low at $556.62. The stock has endured selling pressure after reaching its all-time $644 high on April 10. Since then, the stock has lost almost $88 (13.50 percent) when looking at today's intraday low.

Take a look at its chart:

Click to Enlarge

So how did this happen? The recent decline comes after a large gain during this year, with the stock rising about 60 percent before its correction began.

Other explanations include a possible pre-earnings sell off as the company will report earnings on Tuesday after the bell.

And then, there's also the old behavioral finance perspective. If your grandmother has just decided she wants to buy Apple, it can usually be seen as sign of market top even though it's not called one.

Talk of Subsidies

News also came out on Monday that two brokers have predicted that the high subsidies paid by the wireless carriers to sell Apple's iPhone could come under pressure but nothing is expected to change in 2012.

BMO Capital Markets analyst Keith Bachman wrote, “Broadly speaking, we believe that Apple shareholders have benefited from the growth of the iPhone while services providers and other handset OEM shareholders have not.” He also predicted this “will not continue for perpetuity;” he kept the $650 price target on the stock.

Bachman anticipates the stock may “consolidate” during the June quarter with iPhone sales declining on a quarter-by-quarter basis as consumers await the iPhone 5 launch in late 2012.

Apple Inc. (NASDAQ:AAPL) earnings come with high expectations. Analyst estimates have the company reporting a $9.89 profit per share, an increase from last year's $6.40 profit per share with revenue growing by 47 percent to $36.27 billion; this compares to last year's $24.67 billion. The company has a $8.50 earnings per share on $32.50 in revenue guidance.

Last week, a Canaccord Genuity analyst cut his fiscal quarter three and fiscal quarter four iPhone estimate with fiscal quarter three iPhone sales at 29.34 million units and in the fourth quarter, 26.11 million units. This comes in lower than the previous forecast of 33.58 million and 33.58 million, respectively.

Even with Apple's recent correction, its stock is 41.50 percent higher this year and it now sits as the world’s largest company as defined by its market value.

After the introduction its third iPad in March, analysts increased their price target on the stock, with some listing $700-plus price, which comes in at least 17 percent higher from Apple's current one.

But at the end of the day, if Apple doesn't  crush earnings on Tuesday, its might incur further declines since investors always expect the company to beat estimates.


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