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Shares of Apple (AAPL - Free Report) slipped again on Wednesday, falling about 1.4% in what is becoming a rare downturn for one of Wall Street’s strongest stocks this year. Several of the other major companies affected by the recent tech selloff have already recovered, but it looks like Apple’s woes could continue as investors grow increasingly hesitant about its upcoming iPhone 8.
Given that this year marks the tenth anniversary of Apple’s iconic iPhone device, consumers have been anticipating a monumental release from the tech behemoth. Speculation that the iPhone 8—or iPhone X according to some rumors—could reignite sales of Apple’s marquee product has been fueling this stock for most of 2017, but investors finally look to be displaying caution here.
AAPL has now slipped more than 6% over the past week, and a sense of uncertainty now looms dangerously above the stock. But is the recent dip actually a great buying opportunity? Is AAPL oversold? Let’s take a closer look.
As its VGM grade of “B” highlights, AAPL remains a relatively sound fundamental stock. In a tech world that has seen P/E ratios inflate to astronomical levels, Apple’s P/E of 16.4 remains sensible, and its other value-related metrics back that up too.
Growth wise, this blue chip isn’t expected to blow anyone out of the water, but projected sales growth of 5% and EPS growth of 7.6% are respectable figures. After 2016 saw Apple’s sales decline for the first time since 2001, a return to growth will be nice to see—but even a massively successful iPhone 8 launch may not reach the peaks we saw in 2015.
As mentioned, there is a growing concern that a homerun debut for the iPhone 8 has already been priced in to AAPL’s current levels, which means a disappointing launch could exacerbate downside volatility. Indeed, Apple has seen two ratings downgrades over the past week, and both notes have mentioned the unrecognized risk related to the company’s upcoming product cycle (also read: Here's Why Apple Stock Is Falling Again Today).
Also, we should mention that AAPL is currently a Zacks Rank #3 (Hold). Remember, the Zacks Rank is heavily influenced by earnings estimate revisions, so let’s check out a quick snapshot of the revision activity we have seen for Apple recently:
Unfortunately, this activity doesn’t paint a very clear picture. Analysts are active and revising Apple’s earnings estimates, but there is almost no agreement on the upcoming fiscal periods. We see a slight lean towards the positive direction for the current quarter, but the Zacks Consensus Estimate has actually slipped marginally. For the next fiscal quarter, more analysts have made negative revisions, but the overall effect remains marginal.
What should be encouraging for long-term AAPL holders is that we do see strong agreement on Apple’s next-year earnings estimates. The positive revisions have significantly outweighed any negative sentiment, and the Zacks Consensus Estimate for Apple’s next-year earnings has gained 31 cents over the past 60 days.
However, the lack of agreement on the closest fiscal periods has dragged the stock’s Zacks Rank down, and this picture alone does not give us a clear direction.
Of course, our original line of questioning centered on whether or not AAPL was oversold, so let’s take a peek at some technical charts that are often used for determining “overbought” or “oversold” status:
First, I want to focus on the fact that Apple has been consistently trading above its moving averages over the past six months. It’s also important to note that we’ve seen the 50-day moving average act as a semi-support line, with the stock dipping to test that support in mid-April. As we can see, shares recently moved below that support line, but we haven’t seen any dangerous crossovers between the moving averages yet.
That dip in mid-April is important because it’s also one of the few signs of weakness on our RSI and Williams%R charts. Indeed, that small dip resulted in a brief trip into what some traders consider to be the “oversold” territory on the Williams%R chart, although things never got to the commonly-accepted oversold threshold on the RSI chart.
Nevertheless, the most revealing thing here is the latest moves from AAPL. Both the RSI chart and the Williams%R chart have displayed their bearish signals, but AAPL has not quite reached “oversold” in either calculation. That could indicate that there is still room for the stock to sink further.
Of course, this is only a small snapshot, and not every trader will subscribe to these types of analysis. If you do indulge in technical trading, it’s important to consider several pieces of data and develop consistent system to use.
Finally, any fundamental and technical analysis will depend on what you—the individual investor—prefers to use. Sure, there are plenty of bearish signals here, but we should consider how soon investors will forget these downtrends if Apple knocks it out of the park with the iPhone 8.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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Apple (AAPL) Stock Dips Again: Is It Oversold?
Shares of Apple (AAPL - Free Report) slipped again on Wednesday, falling about 1.4% in what is becoming a rare downturn for one of Wall Street’s strongest stocks this year. Several of the other major companies affected by the recent tech selloff have already recovered, but it looks like Apple’s woes could continue as investors grow increasingly hesitant about its upcoming iPhone 8.
Given that this year marks the tenth anniversary of Apple’s iconic iPhone device, consumers have been anticipating a monumental release from the tech behemoth. Speculation that the iPhone 8—or iPhone X according to some rumors—could reignite sales of Apple’s marquee product has been fueling this stock for most of 2017, but investors finally look to be displaying caution here.
AAPL has now slipped more than 6% over the past week, and a sense of uncertainty now looms dangerously above the stock. But is the recent dip actually a great buying opportunity? Is AAPL oversold? Let’s take a closer look.
As its VGM grade of “B” highlights, AAPL remains a relatively sound fundamental stock. In a tech world that has seen P/E ratios inflate to astronomical levels, Apple’s P/E of 16.4 remains sensible, and its other value-related metrics back that up too.
Growth wise, this blue chip isn’t expected to blow anyone out of the water, but projected sales growth of 5% and EPS growth of 7.6% are respectable figures. After 2016 saw Apple’s sales decline for the first time since 2001, a return to growth will be nice to see—but even a massively successful iPhone 8 launch may not reach the peaks we saw in 2015.
As mentioned, there is a growing concern that a homerun debut for the iPhone 8 has already been priced in to AAPL’s current levels, which means a disappointing launch could exacerbate downside volatility. Indeed, Apple has seen two ratings downgrades over the past week, and both notes have mentioned the unrecognized risk related to the company’s upcoming product cycle (also read: Here's Why Apple Stock Is Falling Again Today).
Also, we should mention that AAPL is currently a Zacks Rank #3 (Hold). Remember, the Zacks Rank is heavily influenced by earnings estimate revisions, so let’s check out a quick snapshot of the revision activity we have seen for Apple recently:
Unfortunately, this activity doesn’t paint a very clear picture. Analysts are active and revising Apple’s earnings estimates, but there is almost no agreement on the upcoming fiscal periods. We see a slight lean towards the positive direction for the current quarter, but the Zacks Consensus Estimate has actually slipped marginally. For the next fiscal quarter, more analysts have made negative revisions, but the overall effect remains marginal.
What should be encouraging for long-term AAPL holders is that we do see strong agreement on Apple’s next-year earnings estimates. The positive revisions have significantly outweighed any negative sentiment, and the Zacks Consensus Estimate for Apple’s next-year earnings has gained 31 cents over the past 60 days.
However, the lack of agreement on the closest fiscal periods has dragged the stock’s Zacks Rank down, and this picture alone does not give us a clear direction.
Of course, our original line of questioning centered on whether or not AAPL was oversold, so let’s take a peek at some technical charts that are often used for determining “overbought” or “oversold” status:
First, I want to focus on the fact that Apple has been consistently trading above its moving averages over the past six months. It’s also important to note that we’ve seen the 50-day moving average act as a semi-support line, with the stock dipping to test that support in mid-April. As we can see, shares recently moved below that support line, but we haven’t seen any dangerous crossovers between the moving averages yet.
That dip in mid-April is important because it’s also one of the few signs of weakness on our RSI and Williams%R charts. Indeed, that small dip resulted in a brief trip into what some traders consider to be the “oversold” territory on the Williams%R chart, although things never got to the commonly-accepted oversold threshold on the RSI chart.
Nevertheless, the most revealing thing here is the latest moves from AAPL. Both the RSI chart and the Williams%R chart have displayed their bearish signals, but AAPL has not quite reached “oversold” in either calculation. That could indicate that there is still room for the stock to sink further.
Of course, this is only a small snapshot, and not every trader will subscribe to these types of analysis. If you do indulge in technical trading, it’s important to consider several pieces of data and develop consistent system to use.
Finally, any fundamental and technical analysis will depend on what you—the individual investor—prefers to use. Sure, there are plenty of bearish signals here, but we should consider how soon investors will forget these downtrends if Apple knocks it out of the park with the iPhone 8.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy... Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion.
Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>