Are You Waiting to Buy Apple at $527?

It's funny to see how quickly analysts went from talking about the ceiling at Apple (Nasdaq: AAPL  ) to discussing the floor. Some of Wall Street's more aggressive pros were eyeing four-figure price targets last month, but now everybody's playing limbo.

How low will Apple go? At least one analyst has an answer -- $527.

Technically speaking
Merlin Securities chief market strategist Rich Bensingor issued a note earlier this week, suggesting that Apple's stock could go as low as $527 based on technical analysis.

Chartists will argue that you can predict a stock's movement based on its chart, as trading patterns and moving averages help identify trends and areas of support. Bensingor's read sees $527 as a possible bottom.

After seeing Apple's stock fall markedly from an all-time high of $644 earlier last month, exasperated longs, gleeful shorts, and fence-straddling opportunists are all asking the question that Bensingor is trying to answer.

I just wouldn't wait for Apple to hit that exact price point.

The hole in technical analysis
I don't have a beef with technical analysts. Many of them make a cozy living playing the market, so their strategy clearly works more often than it doesn't. However, there isn't a single chart that will tell you when one of the many events that may move Apple shares higher of lower will take place. Apple doesn't operate in a news vacuum. Good things and bad things happen. Apple moves on its fundamentals, even if it means defying what a read of the chart would seem to suggest.

Let's go over some of the positive catalysts that can happen with Apple in the coming weeks and months.

  • The iPhone 5 is a lock to come out this year. What if it comes out early this summer instead of in the fall? Now that AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) have their 4G networks in place to the point where the new iPad can come in a 4G flavor, why delay the next iPhone generation the way Apple did last year?
  • The iTV, a full-blown Apple HDTV, seems to be in the works. It even came up in Steve Jobs' authorized biography last year. If Apple can do to televisions what it did to mobile and tablet computing, look out.
  • Apple can continue to post blowout earnings, forcing analysts to keep jacking their profit targets higher. Did you know that Wall Street now thinks Apple will earn more than $47 a share this fiscal year? These same pros thought Apple would earn less than $35 earlier in the fiscal year. Apple's stock has had a good run over the past year, but it's now trading at 12 times this year's earnings.

 There are also naturally some negative catalysts that can pull Apple down.

  • Microsoft's (Nasdaq: MSFT  ) Windows 8 may be a game-changer, especially in tablets, where Microsoft has so far been a nonstarter.
  • Microsoft is shelling out billions to Nokia (NYSE: NOK  ) in an aggressive attempt to catch up to Apple and Android smartphones. This is 58% of Apple's business, so it needs to be protected.
  • Verizon and AT&T are starting to get vocal about their displeasure over the hefty subsidies they have to pay to carry the iPhone. If anything changes on that front -- forcing Apple to cut prices and sacrifice margins or raise consumer-facing prices and sacrifice market share -- Apple will take a hit.

The lists don't end there. You can think of so many things that can go right (the new MacBook Air portables rock) and wrong (the new MacBook Air portables don't rock), and these events will never time themselves to make sure they're in accordance with where a chartist sees support or resistance.

And since Apple has gotten things right far more often than it has gotten things wrong, the smart bet has to be that Apple never tests $527.

Apple jacks
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The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Nokia and creating bull call spread positions in Apple and Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On May 12, 2012, at 7:20 PM, applefan1 wrote:

    If all Apple did was to put the Ivy Bridge processors in the new MacBooks, they would be as good in not better than the Ultrabooks, but apple ism't just going to use Ivy Bridge processors and stop there. That's all I can say,

  • Report this Comment On May 13, 2012, at 12:19 AM, tony1234567 wrote:

    Apple will eventually be much lower than 527.

    Apple without Steve Job is not the same.

    Competition and margins will be tougher.

    And the number one reason that it will go down is: Too much pumping by the media.

    Many people will not agree with these comments, but time will tell.

  • Report this Comment On May 13, 2012, at 10:00 AM, COGBOX wrote:

    That's 12 times this year's earnings without accounting for the 110 billion in cash! Only a little more than 9x this years earnings minus cash. Plus, we're getting close to declared dividends yielding 2%. And, a stock buyback coming. All on a business that has an insanely great growth rate? Who wouldn't want to own that?

    Say their business growth slows, they're still going to be printing money for years. The current dividend won't even dent their growth in cash -- which ultimately will mean dividend growth as well.

    Could a meteor strike cupertino? Could a revolt in China shut down FoxConn? Could a bunch of bad sushi infect the company cafeteria? Yeah, maybe. Probably not likely though.

    Currently the only thing holding AAPL down is perception that "it's really big so it must get smaller sometime". Similar to the reaction if you asked a kid looking at a 747 on the ground "can this fly like a bird"? Well, actually it can. And, it this case, market cap only matters in that it is making the purchase of a fantastic business affordable.

  • Report this Comment On May 13, 2012, at 5:56 PM, charles67 wrote:

    It always amuses me to read people brag about their companies when they are at the top of the heap like AAPL currently is for tablets, not phones or computers either, like they are invincible. I am long another company that people were talking about in the same way when they were riding high, NOK. In tech, changes are constant. Who knows if W8 tablets won't be a hit that will outsell the iPad? No one knows. But W8 tablets only have to sell well, not outsell iPads for AAPL stock price to take a tumble, and I think it's safe to say WP8 tablets will sell at least "well".

  • Report this Comment On May 13, 2012, at 6:14 PM, Oldfool103 wrote:

    @happypoordays

    The stock currently is living under its 50-dma with no signs of ever rallying again, that's not good news.

    It seems to me that we see this virtually every year, be it some misinformation by an analyst; manipulation of the market (telling clients to buy while selling off your own bank's holdings); creating a straw dog out of Apple to stand for bad practices that extend throughout the industry (Foxconn and various stock shenanigans spring immediately to mind); new models by other manufacturers that will eat Apple's lunch, dinner, and midnight snack; problems with the relationships with the carriers that will kill their sales (lack of new models--like the Android universe presents--too high of a subsidy that discounts the massive commitment by Sprint, and would tear a hole through T's and VZ's customer base were they to mess with the Apple pricing); the opening of the China market that carried the last quarter, and the clear preference for iOS devices as demonstrated by the sales of the 4S in the States; lack of features, demonstrated by your discussion of the missing multi-tasking functionality that seems to have replaced the "Lack of Flash!!!" meme that dominated 4 years or so of past commentaries; endless technical discussions of the many Apple misses--the walled garden, the inferior camera, its inability to even complete the basic function of a telephone, the speeds and feeds that most of us, in the non-technical world neither understand nor wish to understand, etc etc. And the most tiring thing of all is the underlying contempt you feel for all of us who have no desire to root or jailbreak or mess with the OS on our phones or our Pads. It is so much like every other underdog in our markets. The Studebaker was the best but the Chevies and Fords outsold them, the Zenith made the finest TV/Furniture but Sony ran them right out of the market, and try and remember pop music before the Beatles and Stones arrived. Either you are an under-appreciated tech wizard or you are still holding RIMM and waiting for the comeback. Apple may eventually fall from its own hubris, but it certainly won't be this year.

  • Report this Comment On May 14, 2012, at 4:47 PM, hiddenflem wrote:

    maybe after a split tony. :)

  • Report this Comment On May 14, 2012, at 5:22 PM, mikecart1 wrote:

    As one of AAPL's past doubters, I now own AAPL shares only because you can't deny the inevitable. If nothing else happens but the iPhone 5, this stock is going to go past $700 easily at some point in the future. It is not if, but when. After that, I don't really care. It can go higher. It can go lower. I will be out and waiting for the next big thing.

    :)

  • Report this Comment On May 14, 2012, at 5:30 PM, dougsull222 wrote:

    AAPL will keep droping until the market stops droping. The market is droping because of Greece, Spain, Italy, etc. When these problems have been solved, the market and AAPL will bottom out. I sold all of my AAPL @ $611 with a 40% gain for 2012. I watch the market constantly and I am ready with cash to buy back into AAPL when the market bottoms.

  • Report this Comment On May 14, 2012, at 5:45 PM, GordonsGecko wrote:

    Only way Tony is right is if there is a stock split.

  • Report this Comment On May 14, 2012, at 6:23 PM, pacella wrote:

    Apple is just too expensive. I don't see the point in owning it. One has to spend over 50K dollars just to buy 100 shares. Even if the stock goes up 100 points, you only make about 20 %. There are so many other stocks to buy that will make you a lot more that 20%.

  • Report this Comment On May 14, 2012, at 6:50 PM, haysdb wrote:

    "BB 10 and WP 8... are light years ahead of that tired old iOS"

    The products won't ship for another 5 to 7 months, and in what ways are they "light years ahead?"

  • Report this Comment On May 14, 2012, at 6:59 PM, mountain8 wrote:

    What's the price of Berkshire-Hathaway. I believe people are still buying and selling BH.

    Am I wrong or is a 20% gain bad.

    Please send me list of all the future 20%+ that you mention.

  • Report this Comment On May 14, 2012, at 7:12 PM, TSIF wrote:

    pacella, a stock that goes up 20% from $500 a share is exactly the same as a stock that goes up 20% from $10 a share. I understand the perception and if owning "more shares" of a stock appeals then by all means do so. Don't, however, pass up a good company that you are interested in because of absolute dollar of the share. Good luck.

  • Report this Comment On May 14, 2012, at 7:31 PM, haysdb wrote:

    I suspect the 100 shares number has to do with Options trading.

  • Report this Comment On May 14, 2012, at 8:30 PM, eldetorre wrote:

    "...the clear preference for iOS devices as demonstrated by the sales of the 4S in the States; lack of features, demonstrated by your discussion of the missing multi-tasking functionality that seems to have replaced the "Lack of Flash!!!" meme that dominated 4 years or so of past commentaries; endless technical discussions of the many Apple misses--the walled garden, the inferior camera, its inability to even complete the basic function of a telephone, the speeds and feeds that most of us, in the non-technical world neither understand nor wish to understand, etc etc. And the most tiring thing of all is the underlying contempt you feel for all of us who have no desire to root or jailbreak or mess with the OS on our phones or our Pads. "

    You make the point of why Apple will not be at these heights forever while missing it. Yes Apple IS very popular right now, but it is popular in spite of the fact that it isn't the best at anything except in the imaginations of consumers. So all the technical complaints made by so called grousers are in fact harbingers of Apple being too dependent on fickle consumers, not genuine technical innovation. Most of Apples patents are only marginally defensible. Look and feel and style are it's only strong suits. In the long term it will only maintain this level of profitability if it buys up a bunch of legitimate patent holders.

  • Report this Comment On May 14, 2012, at 11:19 PM, lowmaple wrote:

    eldetorre. even if you were right abou AAPL, remember those few measly billions. They Can buy! Yes AAPL could be dethroned but not for a few years. I'm going the write some $526 Puts Since if it were to go there it means 5 K extra before it doubles. I also don't know if Cook would wait for Fall if the price dropped enough. Just because Buffet doesn,t want to buy 20 billion of AAPL does not mean any of us can't buy whatever we feel we can afford if that only one share. BTW I do know I would have to write 525 or 530 s.

  • Report this Comment On May 14, 2012, at 11:38 PM, Rujikin wrote:

    Apple has created the perception its products are better and many people believe this. If you cannot afford an apple you go android or blackberry.

    Only people that know Apples business model or are tech savy (know about processors and operating systems) can tell apple is nothing special. Until people become smarter I see Apple doing fine into the future.

    Their new iTV can be a hit if it can convince people its average product is much better than everything else out there. It doesn't need to be better it just needs to be shiney, feel new, and be marketed in a way similar to how Jobs did it.

  • Report this Comment On May 15, 2012, at 12:14 AM, ade61 wrote:

    Apple has lifted off and now is entering an orbiting phase of its life cycle which will eventually lead to a decaying Orbit.

    The belief that Apple’s stock is undervalue due to future earnings in foreign lands is a deception which will soon be revealed due to market saturation and competing products with similar functionality that are available at a lower price point. The principles of supply and demand, along with substitution are in play. The principles of substitution states when a several similar or commensurate commodities, goods or services are available, the one with the lowest price will attract the greatest demand and wide distribution which is why many US companies move their manufacturing overseas, lower labor cost. Apple‘s products are not immune to these principles.

    Apple has sold approximately 210 million iphones since its inception four years ago. The growth rate of Apple’s iphone is astonishing with 270,000 iphone sold in the first year and five years later, if reported sales data is accurate is approaching 100 million units for 2012. Iphone sales will slow next quarter and there after maintain a steady sale rate very much like a rocket which has reach an orbit until other forces slows it momentum and its orbit begins to decay.

    The Analysts belief that Apple is going to expand it sales by 20% a year for the next 5 years at current pricing is a deception. To accomplish this, Apple sales will have to increase to 153 billion in 2012 and by 2016 have annual sales of 318 billion. This equates to approximately 250 million iphone sold or 685000 iphone sold daily in 2017. Iphone sales are the anchor of Apples earnings. What if the iphone isn’t the flavor of the day in 5 years? Could this possibly happen? It has already begun in the United States as Apple will not retain all of its former users as the Iphone and Ipad interface with peripheral devices is lacking.

    The fact is Apple is manufacturing at least 340,000 iphones and 125,000 Ipads each day. That is if their last quarterly report is accurate. That means the world in one year will have an additional 124 million Iphones and a poultry 45 million Ipads which will have to be purchased. In five years if projected growth rate of 20% annually is accurate there will be nearly 1 billion Iphones and 450 million Ipads sold. Apple's product will be commonplace and just another commodity with significantly lower pricing which will dramatically affect apples profitability.

    The majority of Apples sales will not come from the United States as its market has already been saturated and now the Apple fad is diminishing. You can see evidence of this in its declining stock price.

    The belief that foreign markets has the ability to absorb the millions of iphones, Ipads and other products being manufactured is not accurate at least at current pricing which is unaffordable to the masses.

    I know a lot of you Apple lovers have a belief that the first item purchased by Chinese or Indians when money is earned is a phone. This is preposterous I would think it would be food and clothing. But I can imagine all the naked malnutrition Chinese walking around texting and talking on their new iphones and Ipads. I am now having a mental picture of Indians wearing nothing more than their Head Wraps. How about you?

    Just as any life cycle there is a beginning a growth an prime and a decline. Considering the competing products and other factors Apple is likely reaching a plateau considering its staggering amount of income it is currently earning.

    I want to reiterate Apple profitability is beginning to stagnate due to the principles of substitution and supply and demand. It’s definitely not Rocket Science to understand these principles. So if you have capital invested in Apple I would advise seeking alternative investments as Apple stock price is definately overvalued at its current price level.

    see adelaw61blogspot for addtional Apple commentary

  • Report this Comment On May 15, 2012, at 4:11 AM, Zederone wrote:

    People aren't as dense as many here hope they would be. Security matters...privacy matters...people actually like to believe they can control what a silly game or news app can do and access on their mobile device. Some people actually want the term encryption to mean something once the OS gets past the sale of the device. People (I think) just want the thing to work without having to learn about file system management or shell scripts.

    I'm a Linux guy myself and have an Android phone, multiple PC's, and yes an iPad, which I'm using to post this comment. Apple is a manufacturer and it's at this point along with the wireless provider that the OS is corrupted to an unpalatable state for most people. I'm still waiting to see a "collects fingerprints when screen is touched" permission on my Android device because you know it's coming...

    Many good points in the comments above mine and I'm actually kind of bullish on the Windows 8 thing but jeeze, how many times do you have to see it before a pattern forms.

    AAPL becomes speculative and risky then BAM!

    There it is.

  • Report this Comment On May 15, 2012, at 9:23 AM, mikecart1 wrote:

    "Apple is just too expensive. I don't see the point in owning it. One has to spend over 50K dollars just to buy 100 shares. Even if the stock goes up 100 points, you only make about 20 %. There are so many other stocks to buy that will make you a lot more that 20%."

    Here are the points:

    1) Apple is actually too cheap. Share price does not mean anything without other key statistics.

    2) Apple is coming out with a dividend late this year that should rise in the future.

    3) The consensus of the stock is that it hits easily $800, some say $900, and a few say $1000+. That is over 80% gains.

    4) What are these other stocks that will make a lot more than 20%?

  • Report this Comment On May 15, 2012, at 12:14 PM, sept2749 wrote:

    It's funny how all the naysayers come out of the woodwork as soon as APPL has a bad couple of weeks. Fellows, anthing can happen with AAPL! 70% of the stock is instuitionally owned, so any significant move by these guys will have an affect on the price (short term) a hell of a lot more then last quarters great numbers. AAPL makes the best "toys" in tech land, they have no debt and about 100 billion cash in the bank. I am long on AAPL and sleep very well at night.

  • Report this Comment On May 15, 2012, at 2:25 PM, bradeoneill wrote:

    a pe of 13 on a company with 110 billion in cash, (20% of value of company) and a company that doubled revenue over the past year and is likely to at least match that over the next year is a no brainer.

    Why will they double revenue? because smart phones are only 30% of the market and people are very happy with the product. we are going from black and white tv to color tv here folks. in a few years everyone is going to be on a smartphone. Also china has just come online, there is a very solid upper class in china that will buy these things once they become available.

    will there margins shrink possibly, but what if they go with a financing model on phones instead of cutting their prices. will Americans pay an extra twenty bucks a month on their phone bill instead of going without? I think they would.

    I just bought more apple yesterday, and if I move out of other positions and free up some cash it is a coin flip for me between apple and msft.

  • Report this Comment On May 15, 2012, at 8:44 PM, dwilh51183 wrote:

    AAPL IS SO UNDERVALUED. ARE YOU PEOPLE DUMB OR JUST STUPID. AAPL IS A CULT , AND I THINK MOST OF YOU MUST HAVE FLUNKED MATH IN SCHOOL, BECAUSE AAPL IS GOING TO BUY BACK 10 BILLION DOLLARS WORTH OF STOCK STARTING REALLY SOON, AND MUTUAL FUNDS AND INVESTORS LIKE ME WILL BUY MORE OF AAPL AT THESE DEPRESSED "ON SALE PRICES". LOOK , AAPL IS GOING DOWN FOR 1 MAIN REASON... ITS BECAUSE THE BIG SHOTS ARE SELLING AAPL, AZO, ISRG, CMG, NVO, PCLN SO THEY CAN JUMP INTO FACEBOOK AND MAKE QUICK CASH THEN DUMP IT AND JUMP BACK IN AAPL...THE GREATEST COMPANY STILL WITH MUCH HIGHER ROOM TO GO UP, UP UP TO 850.00

  • Report this Comment On May 16, 2012, at 1:49 PM, TheDumbMoney2 wrote:

    I'm a fan of Apple. It is one of my largest RL positions.

    But the fundamentals don't matter right now. When the technical traders are in control, as they often are when there is no actual news to change the fundamentals, just ignore them or be amused by them, or play them.

    The reality is, the technical guys see a huge parabolic move, they want to see it retrace. Period. And if enough of them get excited about this, or fear this, it happens. Period. Fundamentals are not relevant. Apple is a buy at $527, $550, $570, $600 and $650.

    But that does not mean we should necessarily ignore what the technical people are saying. If I can get it at $527, that's obviously better than getting it at $650. I added on the way down at $570. I'm considering adding at $550. I expect it to go lower and I think $527 is quite possible.

    Again, the insight I think many fundamental investors fail every to "get" is that technical traders ARE some of the greatest CAUSES of the irrationality that Mr. Market gives us. This is precisely because: 1) they don't care about the fundamentals at all; 2) they manipulate tons of money; and 3) their time frames are short.

    It is reasonable to ignore them. It is also reasonable to look when they create buying opportunities. When guys like @TraderFlorida stop crowing about shorting Apple, that'll likely be a good buying opportunity.

  • Report this Comment On May 17, 2012, at 4:37 PM, user5701 wrote:

    On 5/17, Apple's closing price: 530.12. What were you saying about Apple never hitting $527? Apple has been dropping like a rock from $644, to a loss of $114, to where it stands now. And that's despite that $80 upswing a few weeks back also. It's quite possible given Apple's recent downturn we will get an even better buying opportunity than $527.

  • Report this Comment On May 17, 2012, at 7:22 PM, gmc0652 wrote:

    I would like to invest in Apple, but cannot afford to pay 500+ per share, so for me, it's too expensive.

    That's not the same thing as saying Apple shares are overvalued. At a PE of 12 the stock would appear to be undervalued, especially if it's earnings are still growing.

    The comment above that you would have to lay out a LOT more money to make a sizable return with Apple than with a stock trading at $20 makes sense. So what's the answer? Without a stock split investors such as myself will have to be content with our $20 shares and allow the big guys to benefit from the Apple prosperity

  • Report this Comment On May 17, 2012, at 7:39 PM, TruffelPig wrote:

    I bought some today. For 532! Now I feel so terrible to have missed the 527 entry point. LOL

    AAPL will go back to see new highs eventually. Maybe not this year (I think so but who knows) but then next year.

  • Report this Comment On May 17, 2012, at 8:07 PM, reallypeacedoff wrote:

    user5701

    I agree. I personally think that Apple will hit a fairly good level of support at around $520 ($516-$525), bounce 5% to the closest level of resistance at around $550 ($547-$555) and inevitably fall below $500. I hope that it falls to the daily 200sma (upward trend so ~$460) as this has been a trampoline for Apple, a no brainer for going long.

  • Report this Comment On May 17, 2012, at 8:19 PM, haysdb wrote:

    I'm taking advantage of an irrational market. I'd be thrilled to see 527, or 497, because it doesn't change the fundamentals one bit - it just makes it cheaper to buy.

  • Report this Comment On May 17, 2012, at 8:48 PM, Hawmps wrote:

    "•Verizon and AT&T are starting to get vocal about their displeasure over the hefty subsidies they have to pay to carry the iPhone." Great comment. Verizon and AT&T have been significantly subsidizing Apple's growth for a while. This will change.

  • Report this Comment On May 18, 2012, at 1:25 PM, ArchitectII wrote:

    Wouldn't it have been better to wait for 522.18?

    That certainly was at the bottom of the data spike game.

    b

  • Report this Comment On May 18, 2012, at 3:32 PM, ArchitectII wrote:

    What a wild and wonderful Daytrading Day on AAPL.

    Somebody picked up lots of bucks.

  • Report this Comment On May 18, 2012, at 4:08 PM, jaarsrep wrote:

    Well, look here! As I write, AAPL is at $530--less than 1% away from $527. Technicals are amazing!! How did they do that?

    What a difference a week makes, eh? --Tim H.

  • Report this Comment On May 18, 2012, at 4:15 PM, ArchitectII wrote:

    And wow, Facebook went up 23c and AAPL traveled 41.37

    Take your pick.

  • Report this Comment On May 18, 2012, at 5:21 PM, ArchitectII wrote:

    Oh jeez AApL is down 12 bucks from thur., you probably think Facebook is better.

  • Report this Comment On May 18, 2012, at 9:07 PM, haysdb wrote:

    "What a wild and wonderful Daytrading Day on AAPL.

    Somebody picked up lots of bucks."

    Or lost money because they guessed wrong. It's a zero sum game.

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