Another Look at Apple’s Share Correction and Rebound Potential

Another Look at Apple’s Share Correction and Rebound Potential

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Since reaching $700 a share in September 2012, Apple (AAPL) began its descent. Apple officially reached a “correction” after trading at around $627, 10% below its all-time high. Are Apple shares a classic “buy on the rumor, sell on the fact” situation, driven higher on anticipation of the iPhone 5?

The Maps fiasco could also be a reason sentiment shifted to the downside. Supply constraints for the new device may also be a factor. Analysts forecast higher sales without considering sales would be limited by availability during the quarter.

Price chart of Apple, 1 month period:

Even though there was talk that Apple will be the first $1 trillion company by market capitalization, Apple still has a reasonable P/E. Apple’s P/E ratio is around 14.5, nearly the same as that of Microsoft (MSFT). Kapitall.com calculates its POP (Price of Profit) to be just 12, compared to 10 for Microsoft. Google’s (GOOG) P/E ratio is 22, whilst Amazon.com (AMZN) has a P/E of 300.

Analysis

Talk that Apple peaked remains premature. Even if the iPhone 5 and 3rd generation iPad is at a peak, strong sales are a challenge against this bearish call. Still, the stock market is a voting machine, and Apple needs to find new ways to grow. Rumors for an iPad “mini” would help Apple remain competitive in the tablet space. Competitors are selling 7-inch tablet devices at a fraction of the price of an iPad.

Apple is still thought to be looking at ways to enter the television market. Online video streaming is currently dominated by Netflix (NFLX). Sony (SNE), Google, and Amazon also offer online content.

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All of the companies mentioned should be added to your watch list. The companies are:

 

 

1. Amazon.com Inc. (AMZN, Earnings, Analysts, Financials): Operates as an online retailer in North America and internationally. Market cap at $110.39B, most recent closing price at $244.18.

 

 

2. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $595.03B, most recent closing price at $634.76.

 

3. Google Inc. (GOOG, Earnings, Analysts, Financials): Google is the world's most popular search engine. Market cap at $242.32B, most recent closing price at $740.98.

 

 

4. Netflix, Inc. (NFLX, Earnings, Analysts, Financials): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap at $3.6B, most recent closing price at $64.76.

 

5. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $248.8B, most recent closing price at $29.51.

 

6. Sony Corporation (SNE, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $11.74B, most recent closing price at $11.69.

 

 

Written by Chris Lau.

To interact and discuss these picks with users, attach your watch list or portfolio to your friends on Kapitall. Message the author. He is ranked sixth (by points) on the all-time leaderboard. The leaderboard is located on your score icon -> Leaderboard.  Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed for goods at the Kapitall store.

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5 Responses to “Another Look at Apple’s Share Correction and Rebound Potential”

  1. Recent market movements have shown how vulnerable Apple is to a product stumble though. I would argue that they don't deserve the same kind of P/E that Pepsi or Coke have.

    Disclosure: I own Apple, I own Pepsi. I do not own Coke.

  2. tulleuchen says:

    If they hit $1 trillion maybe they'll have to start their own country.

  3. langer5635 says:

    It will be interesting to see if they can maintain the same cool innovation and attention to detail of Steve Jobs. If they can master that then they could possibly pass that benchmark.

  4. Jeff B. says:

    Apple stock price will recover with Q4 sales as it always does and with a lot of "wait and see" in the market until after the election, they will probably be a blue chip many come back to after Nov 6 as well.

  5. @undefined says:

    agree with @undefined

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