Apple is dragging down the NASDAQ and the S&P 500 yet
again today as shares hit a fresh 2-month low.
The stock is now down over 25% from its all-time high.
But if you follow us here at Zacks regularly, this sell off
shouldn't be that much of a surprise because we debated this very
event just a few days after the stock hit its high in September.
Talk about timing!
Eric Dutram, Zacks ETF Strategist, warned about the
exuberance surrounding the stock (and dared to compare its chart
to Microsoft's during the dot-com boom) in
"When Do You Sell Apple?"
.
He wrote:
While some people refuse to believe that Apple has
anywhere to go but up in both the near term and in the long term
as well, some possible catalysts are already beginning to appear
for the eventual decline. Although a number of issues are
starting to crop up, a few of the biggest include:
Supply issues in China-
How long can you pay someone two dollars an hour to make
something that costs $600 retail (before rebates/waivers)? Where
is the backlash/protests against Apple for not manufacturing
anything in the U.S. despite their impressive cash hoard and
margins?
Increased competition-
The tablet game is no longer dominated by the iPad as a variety
of exciting new products look to eat into Apple's market share
and drive down margins for the firm. A similar situation is also
in the phone world as well; arguably the iPhone isn't the best on
the market anymore, how long will people line up for an
'inferior' product?
Lack of Steve Jobs-
Jobs was a landmark figure of our age, his loss to Apple would be
the same as if Warren Buffett had died 30 years ago; a truly
catastrophic blow. His vision carried Apple to its impressive
status today, but what is next? Sure his ideas can sustain the
firm for a few years, but without a new visionary, one has to
wonder when the shine will come off of Apple.
None of the issues that Eric previously discussed has changed
with the company in the last two months. But its shares are now
25% cheaper.
The fundamentals are still solid and it remains a value
stock.
Forward P/E = 10.5
PEG = 0.5
Zacks #3 Rank (Hold)
Dividend yield: 2%
It will sell millions of iPads and iPhones this holiday season
and has $120 billion in cash.
With many investors seemingly panic selling, is it time to
jump back in?
When do you BUY Apple?
APPLE INC (AAPL): Free Stock Analysis Report
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