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Apple Continues Slump: Can the Stock Recover in 2016?

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Shares of Apple AAPL fell 2.3% to just below $107 today. This marks a 20% drop from its recent high of $134.54, meaning that the stock has slipped into the dreaded "bull market." With the New Year less than two weeks away, will Apple be able to recover in 2016?

The biggest concern that investors seem to have with Apple is whether it has any more room to grow. With shares growing an average of 28% a year over the last decade, a flat year like 2015 is shaping up to be is quite concerning.

Apple has been struggling with shrinking phones sales-this is the first year since the release of the iPhone that total sales will go down-and sluggish new products such as the Apple Watch, which failed to take off.

What's even more concerning is the fact that Apple's large-cap tech rivals are not having the same problems. Despite the razor-thin margins of e-commerce, Amazon AMZN has doubled in value on the back of its cloud computing platform. Microsoft MSFT , up 19% on the year, has shifted its strategy in the face of declining demand for PCs.

As we look ahead to 2016, Apple will need to motivate investors like its competitors have. For one, its over-the-top television service, which will be compatible with Apple TV and compete directly with Netflix NFLX , needs to be a hit.

Additionally, Apple needs to work on new ways to get customers to buy its preexisting products. For example, Apple's new iPad Pro is about $800, making it much too expensive for a casual tablet user. However, that's right around the price that of a mid-tier notebook, and hopefully Apple can win over people shopping in that department.

The Apple TV and iPad Pro are also important because they aren't iPhones. Yes, that sounds so obvious it's almost dumb, but work with me here. If Apple can get a new customer acquainted with Apple products via the Apple TV, they might just turn a non-iPhone user into an Apple diehard.

Thinking outside the box a bit, it might be a good idea for Apple to dive into the enterprise software game. The best performing tech stocks of 2015, known as the MAGS stocks, are Microsoft, Amazon, Google GOOGL , and Salesforce CRM . All of these companies either revolve around or have increased their focus on cloud computing at the enterprise level. Apple has solid cloud technology, and it could be quite profitable if it starts selling it better.

Currently, Apple has a Zacks Rank #3 (Hold). For fiscal 2016 (through September of the calendar year), we have seen 10 positive earnings estimate revisions versus seven negative revisions in the past 60 days. Based on current estimates, Apple is expected to see earnings growth of 6.5% in that time period.

Right now, it's simply too early to tell whether Apple will be able to turn it around in 2016. If the company can successfully update its strategy, investors could be in for a nice ride, but that is a big if.

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APPLE INC (AAPL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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