Apple Inc(
AAPL
), which used to be on top, has lost a whopping 25% of its market
cap since mid-September, and there are a number of factors
suggesting that stock will continue to fall. How much further can
the tech behemoth fall before it hits rock bottom?
Technicals Not Looking Good
Just roughly two months ago, Apple was seeing its stock at an
all-time high, reaching over $705. Since then, the stock has
declined by 25% following the release of the iPhone 5, to about
$525 on Nov. 16. The stock just passed through the $530 technical
level on Wednesday, and it continues to fall even further. With the
next level of support declining to $420, many investors believe
that the stock could actually plummet to $420, or even lower.
However, the psychological round number of $500 could attract
buyers, should it hit that point.
And despite such a significant decline, APPL is still up 25%
year-to-date, outpacing the S&P by fifteen percentage
points.
This fall has surprised many investors; a stock that just
recently reached all-time highs is now rapidly falling, with no
major news events to point to for the decline. The recent plunge
has even pushed the company's dividend yield to over 2%, up from
the mid-1% level it was at just last month (dividend yield moves
inversely in relation to price).
Some Big Shots are Trimming Positions
Technicals are not the only clue for investors about where AAPL
is going. Famous hedge fund manager David Einhorn recently cut 25%
of his stake in the company, going from 1,454,520 shares to
1,090,890 shares.
Additionally, it was reported that last Thursday that two Apple
insiders sold a significant portion of their shares. Apple's
general counsel, Bruce Sewell sold 2,438 shares of Apple which were
priced around $549. He then sold another 2,700 shares priced at
$550. In total, Sewell sold $2.8 million worth of Apple shares this
week. Earlier this month, Sewell made another sell of 5,137 shares,
totaling $3 million.
Board member Arthur Levinson also made a large transaction on
Thursday, selling 7,500 shares at $560.65, totaling $4.2
million.
Other Factors to Consider
If weak technicals and insider selling is not enough to make
investors cautious, there a few other factors which are signs of
decline in the stock.
Recent reports indicate that the iPhone 5 will not be released
in China anytime soon. Apple and China Mobile were unable to make a
deal regarding the phone, which had originally been slated for an
early 2013 release in Chinese markets. Analysts do not believe that
this is was technical issue, but an issue with the carrier's data
network.
The lack of supply for the iPhone 5 has also been a concern for
investors. Since the September release of the phone, Apple's
manufacturers have been unable to meet demands. Although demand has
slowed down slightly, making it a little easier for Apple to catch
up with manufacturing there may not be enough phones to meet the
holiday season demand, which is a huge and essential revenue
booster.
Sure, there are plenty of Apple investors that are holding on to
the stock, waiting a little longer to see what happens, but that
does not mean that there are not a bunch of people out there still
planning on selling. There has also been a significant increase in
short interest for APPL, which is a definite sign that a growing
number of traders believe that the stock has more downside ahead of
it.
The Bottom Line
Only time will tell how low AAPL will go. Several factors are
not aligned in its favor however. From a technical standpoint,
things don't look good. Many investors are selling the stock to
protect their remaining gains, if any. Although many other
investors remain optimistic about the stock, the factors mentioned
above definitely show that they are reasons to remain cautious with
Apple.
Apple Inc(
AAPL
) is not recommended at this time, holding a Dividend.com DARS™
Rating of 3.4 out of 5 stars.
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
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.