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Time to Double-Dip Apple Shares

Richard Suttmeier

04/10/13 - 07:35 AM EDT
NEW YORK ( TheStreet) -- Wall Street analysts remain cautious on Apple (AAPL) and have lowered price targets. For example, Goldman Sachs (GS) recently picked Apple off its prestigious "Conviction Buy List" and lowered the stock's price target to $575 from $660. At ValuEngine, Apple has maintained its buy rating and remains one of the best value plays in the stock market today.

Wall Street prefers Google (GOOG) and there are many articles on the Internet that try to justify a $1,000 price target for this stock. At ValuEngine we disagree, as Google remains hold rated with the stock extremely overvalued.

Meanwhile, Amazon (AMZN) remains sell rated according to ValuEngine, but the stock remains above its 200-day simple moving average (SMA) at $248.69.

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Apple remains the best Value Stock: Traders and buy-and-trade investors could have bought Apple at my annual value level at $421.05 on March 3/4 and the stock rebounded to $469.95 into March 25, providing a gain of more than 10%. This rebound approached my semiannual pivot at $470.21. Last Friday was an opportunity to double-dip at the $421.05 annual pivot.

Chart Courtesy of Thomson / Reuters

Apple still has a buy rating with fair value at $555.64, which makes the stock 23.2% undervalued in the computer & technology sector which is 9.0% overvalued. Apple has a 12 month trailing P/E of 10.11, and a 12 month forward P/E of 9.07. The weekly chart profile remains oversold and if the stock breaks below $419.00 the risk is to this week's value level at $406.75 with the 200-week simple moving average (SMA) at $371.43. For Apple to swing back to mojo status, the stock needs a weekly close above the five-week modified moving average (MMA) at $445.10.

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Sustaining $800 has been a problem for Google: After setting a record high at $844.00 on March 6, Google briefly dipped below $800 on March 28 with a low that day at $793.30. On April 1 the stock dipped slightly lower, but by the close was back above $800. On April 2, the stock failed below its 21-day SMA at $817.51 and on April 5 was below its 50-day SMA at $797.21 and on Monday Google traded as low as $768.40. It appears that as soon as Wall Street raised targets, the stock made a u-turn and could not hold $800.

Chart Courtesy of Thomson / Reuters

Throughout the pop above $800 Google maintained a hold rating and today's fair value is $638.66, which makes the stock 21.8% overvalued within the 9.0% overvalued computer & technology sector. The ValuEngine one-year price was just above $840 back on March 6 and is $820.20 today. The stock's 12 month trailing P/E is 22.89 with a 12 month forward P/E of 19.53. My quarterly value level is $732.99 with this week's risky level at $818.01. The weekly chart for Google shifts to negative with a close this week below the five-week MMA at $789.50. This will signal that Google has lost its mojo status.

Amazon remains the sell-rated stock among the three musketeers of the mojo world. After setting an all-time high at $284.72 back on Jan. 25, Amazon has been trading sideways to down to a low of $252.07 on March 22.

Chart Courtesy of Thomson / Reuters

The problem with Amazon as March began is that the ValuEngine models caught up with the fact that the stock's 12 month trailing P/E is 2,901.6 with a 12 month forward P/E of 157.21 and trades at 21 times book value. Amazon is certainly not a value stock, and has already lost its mojo status. A close this week below its five-week MMA at $262.22 would keep weekly chart profile negative.

You can still employ a buy-and-trade strategy on Amazon ($261.14) as the stock has semiannual and annual value levels at $241.23 and $226.80 with this week's risky level at $264.15, and my quarterly risky level at $278.28.

Given the recent underperformance of Apple, Amazon and Google, it should be difficult for the S&P 500 to sustain gains above its October 2007 intra-day high at 1576.09.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.


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