Apple Shares Tank, What To Do Next

Daniel Martins

Apple shares have gone full circle. After climbing strongly in the first two days of the week, up 8% very quickly, the stock pulled back sharply in the following day and a half of trading (I write this sentence well ahead of Thursday’s closing bell). Could this be the beginning of the end of an impressive rally in the Cupertino company’s shares?

Here are some thoughts about it.

What seems to be happening

  • I have talked about the risk that Apple’s executed stock split could put a damper on share price momentum. At first glance, my concerns seemed overblown. The stock continued to climb, supporting CEO Tim Cook and his team’s beliefs that a lower nominal share price would raise demand from potential investors. Now, it starts to become more obvious that post-split excitement had very short legs.
  • Usually, Apple holds its important iPhone upgrade event in September, between the first and second weeks of the month. Several days ahead of it, between August 27 and 30, the company sends a “save the date” invitation. It is now September 3, and the Cupertino company has not announced the event. If it fails to do so by tomorrow, investors will likely not hear from Apple until after Labor Day holiday, on September 8. The longer the wait, the higher the probability that the iPhone 12 with 5G capabilities will have its launch pushed back – possibly even into November. This can be a bearish development in the early innings of the crucial 5G “supercycle”.
  • In my view, “sell side love” could be a source of continued share price momentum. As a quick recap, Apple stock is currently rated a “buy” by Wall Street, but price targets have become stale. So far, analysts have reacted by bumping their price targets and offering bullish remarks to support optimism. If market prices take a turn for the worse, the sell side may hold back on its upbeat comments, or even feel encouraged to offer words of caution to investors.

By the way, regarding the Nasdaq

The key takeaway

I continue to think that Apple is a stock to own, not to trade. The rather sharp correction of the past day and a half is not nearly good enough a reason, in my opinion, to exit an Apple position completely.

However, I reinforce my convictions expressed in late August that rebalancing a stock portfolio by shedding a bit of Apple makes sense to me, given the 150% rally of the past 12 months. I would not see the move as a bearish statement, but as a reasonable and prudent action instead.

Read more from the Apple Maven:

Apple Stock: The Longer, The Better

Apple Stock: Off To A Great Start This Week

Previewing Apple’s Week: Approaching Catalysts

(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)

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