Investors have undoubtedly been quite disappointed with Apple (AAPL - Analyst Report) and its stock performance as of late. The company’s shares have fallen by about 22% in the last six months, including a double digit loss in 2013. This especially hurts considering that the S&P 500 has risen by over 15% in the same time frame, suggesting a huge level of underperformance for the firm.
And to add to investors’ woes about the stock, Apple continues to make piles of profits and has engaged in more shareholder friendly actions lately, leaving many to wonder why the stock continues to fall.
At least part of the reason for the continued pessimism has to be ongoing margin contraction in key segments, and a lack of new product ideas. Many have latched onto the idea of an ‘iWatch’ but Tim Cook’s comments about this—and especially regarding Google Glass—are eerily reminiscent of Steve Ballmer (CEO of (MSFT - Analyst Report)) and his early dismissal of the key Apple products.
Thanks to these issues on the margin, competition, and new product fronts, many analysts have become extremely bearish on the firm, including pushing the full year EPS target down from $45.19/share 90 days ago, to just $39.41/share today.
Due to this, for the first time since early 2009, Apple has fallen to a Zacks Rank #4 (Sell). Securities in this dreaded territory have historically underperformed broad markets, and with the level of analyst disdain about the company, it could remain in this danger zone for quite some time.
So at least based on this look, it is finally time to give up on Apple shares, and focus in on better positioned companies in the technology world.
Reasons to be optimistic?
Despite all this doom and gloom, however, Apple bulls can take solace in one thing about the #4 Rank. The last time this happened it turned out to be pretty much a bottom for shares of AAPL.
In early 2009, once Apple’s stock moved out of the doldrums of the ‘Sell’ Rank and into #2 Rank territory, the stock went on one of the most incredible runs in large cap history, doubling in roughly a year’s time.
While the stock obviously didn’t stay at a #2 Rank during this entire time period, it never moved back to a ‘Sell’ Rank, so some investors may be hoping for a similar situation—both in terms of performance and rank-- this time around as well.
But what do you think? Does this recent downgrade to #4 territory make you want to finally give up on AAPL? Or are you going to be looking to get back in on this stock once it gets into ‘buy’ territory once more, as this could signal another massive run for the firm?
Let us know in the comments below!
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