Apple Stock: Bears Venture Out Of Their Caves
In the stock market, things can change on a dime.
For a while, I have been talking about “sell side love” being a potential source of further share price upside for Apple. The theory: as the stock climbs and Wall Street’s price targets become stale, analysts would have to publish bullish research notes to refresh their ratings, creating a virtuous cycle.
The problem is that Apple share prices have corrected fast: 13% off the peak in less than one week. As a result, price targets are now very much in line with market price – see below. Considering the bearish momentum, it is unlikely that bulls will want to stick their necks out as Apple continues to unwind.
Bears take over
Let’s go back to Apple’s earnings day. The company’s results had been so good on the heels of a highly disruptive health and economic crisis that Wedbush analyst Dan Ives was compelled to offer the quote: “Apple bears can now go back deep into their caves”.
They certainly did, as Apple shares climbed about 35% between the end of July and last week. Now, more quickly than many expected, the bears seem to be venturing out of their caves.
One of the first ones to do so was Goldman Sachs’ Rod Hall, a rare analyst on Wall Street to have a sell rating on the stock. He has come out stating that the “iPhone is a very tough act to follow”, and that services and wearables are not “likely to be large enough to return the company to growth”. He added that other tech giants like Amazon and Microsoft “are delivering the numbers and yet are valued at about the same multiple as Apple”.
A downward spiral?
Rather that sell-side love, we may start to see some bearish victory laps in the immediate future. In addition, Apple is fast approaching a price level that matters to many traders: the 50-day moving average – see graph below, blue line against the red line. Should the stock dip below $111 per share, technical analysts may begin to pull the plug on this particular stock, which could put even more pressure on Apple and the market as a whole.
Now may be a good time to reiterate my stance on Apple: I am bullish for the long term. I believe that this is a stock to buy and hold, not to trade. However, as I stated on August 28, I also think that:
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