Apple is dragging down the NASDAQ and the S&P 500 yet again today as shares hit a fresh 2-month low.
The stock is now down over 25% from its all-time high.
But if you follow us here at Zacks regularly, this sell off shouldn't be that much of a surprise because we debated this very event just a few days after the stock hit its high in September. Talk about timing!
Eric Dutram, Zacks ETF Strategist, warned about the exuberance surrounding the stock (and dared to compare its chart to Microsoft's during the dot-com boom) in "When Do You Sell Apple?".
While some people refuse to believe that Apple has anywhere to go but up in both the near term and in the long term as well, some possible catalysts are already beginning to appear for the eventual decline. Although a number of issues are starting to crop up, a few of the biggest include:
Supply issues in China- How long can you pay someone two dollars an hour to make something that costs $600 retail (before rebates/waivers)? Where is the backlash/protests against Apple for not manufacturing anything in the U.S. despite their impressive cash hoard and margins?
Increased competition- The tablet game is no longer dominated by the iPad as a variety of exciting new products look to eat into Apple’s market share and drive down margins for the firm. A similar situation is also in the phone world as well; arguably the iPhone isn’t the best on the market anymore, how long will people line up for an ‘inferior’ product?
Lack of Steve Jobs- Jobs was a landmark figure of our age, his loss to Apple would be the same as if Warren Buffett had died 30 years ago; a truly catastrophic blow. His vision carried Apple to its impressive status today, but what is next? Sure his ideas can sustain the firm for a few years, but without a new visionary, one has to wonder when the shine will come off of Apple.
None of the issues that Eric previously discussed has changed with the company in the last two months. But its shares are now 25% cheaper.
The fundamentals are still solid and it remains a value stock.
Forward P/E = 10.5
PEG = 0.5
Zacks #3 Rank (Hold)
Dividend yield: 2%
It will sell millions of iPads and iPhones this holiday season and has $120 billion in cash.
With many investors seemingly panic selling, is it time to jump back in?
When do you BUY Apple?