Will Apple Tumble Below $400?

At the end of January, I predicted that Apple (NASDAQ: AAPL  ) would touch $400 per share before it crossed $500 again. While the stock made a valiant run to $480 in an effort to prove me wrong, it has since shown significant weakness that brought shares within less than a dollar of recent lows during last Friday's trading session. Still trading with a P/E below 10 and looking like a real value, investors are beginning to ask themselves whether the stock will tumble, soar, or stagnate. While there seem to be several catalysts lurking in the shadows, none has pushed to the forefront to take control of the stock's future.

Potential positives
While there is little evidence that either product is imminent, the release of either the iWatch or iTV has been widely rumored and is drawing attention from investors. News of the next-generation iPhone, as well as the release of a cheaper version that will allow the company to make a significant push into the emerging markets, could likewise serve as a positive, but the timing of each of these events is not likely to drive the stock at present. There's also some concern that the iPhone 5S -- if Apple follows its regular pattern -- could be a letdown.

The most plausible positive is an announcement from Cupertino of an initiative to put more cash back into the hands of Apple shareholders. Ever since the shareholder lawsuit leading up to the last shareholder meeting, the issue has been on the minds of many investors. Apple's reported $137 billion in cash could make shares more attractive if some of that amount began to flow.

Stumbling blocks
Unfortunately for Apple, the number of potential negative catalysts is probably longer than the positive ones. Facebook's (NASDAQ: FB  ) announcement of Facebook Home has the potential to pressure Apple sales, as the platform exists solely on Google (NASDAQ: GOOGL  ) Android devices. In addition to integrating the Facebook experience more fully into the phone, Facebook Home apparently streamlines the operation of Android in such a way as to make it more user-friendly, an area Apple has historically commanded. If evidence emerges that Facebook Home is gaining traction, expect to see further concerns for Apple.

Another Android based threat is the arrival of the Samsung Galaxy S4. The new smartphone from the world's largest manufacturer of wireless phones is definitely likely to put pressure on Apple. While Apple reclaimed the top spot over the Galaxy S III after the iPhone 5 was released, Samsung had temporarily beaten Apple on its home turf. Samsung continues to make inroads, taking aim at Apple in various ways -- another new development is the new retail locations that Samsung is introducing.

Probably the biggest risk factor for Apple shares is the direction of the overall market. While each of the major indexes has been flirting with progressively higher all-time highs, a correction could easily pull Apple shares below $400. The company's earnings release at the end of this month has dramatic potential as well, not because the numbers won't be strong, but because Apple shares tend to react poorly to anything other than perfection -- a mere 47 million iPhone 5s sold.

With this marking the first earnings release since Apple shifted to "range guidance," the Street is less certain what to expect. Any perceived weakness will probably be punished, making $400 per share quite reachable. Ultimately, the stock still carries strong fundamentals at a very attractive price, but near-term forces are a matter of concern. I maintain the belief that you'll see $400 before $500.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (8) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 10, 2013, at 6:45 AM, lojikfool wrote:

    Have you noticed that apple is being treated like a defensive utility stock, if the overall market is down people run to defensive stocks, like Apple so I don't think we have much risk there unless the bottom falls out or we have a repeat of SARS. Fair enough on your other points though.

  • Report this Comment On April 10, 2013, at 8:04 AM, kenpat06 wrote:

    Not sure what you are ranting about. Seems like you have short interest in Apple. In January Apple was already in a bear market so your analysis had little meaning?

    As for the FB Home it has no relevance to Apple it will hurt Google more than Apple so look for Google to counter its rise before it will impact Apple.

    Samsung phones have been in existence all along and all they have done is taken away share from other Android devices if you have read IDC's latest research. But I guess your personal interests are to see 400 rather than 500. And you maybe right but the point of your article is pointless because you admit Apple will touch 400 and 500 and both are entirely possible without giving a timeline on it.

  • Report this Comment On April 10, 2013, at 8:45 AM, singaporenick wrote:

    Yep,this guy is just a fund trader with a short position on Apple.

    So he keeps writing rather uninformed articles about why Apple's price should go down.

    Yawn....

  • Report this Comment On April 10, 2013, at 9:24 AM, speechisntfree wrote:

    in a perfect world..... options trading wouldn't exist.....

    you either have the balls to buy it.....

    or you don't.

  • Report this Comment On April 10, 2013, at 11:22 AM, differenttake wrote:

    My guess is the selloff was done because the belief was the stock would, after reaching a nice round number high after a big run-up, stagnate sideways till new products came out so, best to get $$ working else where and then come back to it later, $$ is following new product release schedule.

    If I phone 5 S, as you call it (S was for Siri wasn't it on iphone 4 update?) is following a "regular pattern" then why would there be disapointment?

    The big move will not be hardware update specific but what you can do with your phone, this will be comunication between devices that exist plus new ones this is more software and new products related. no one is better positioned than apple for this. Samsung can fiddle with the phone itself and then eventually copy what ever products apple has brought forward. This is a historical pattern easy to see, the only differentiator to Samsung is a larger screen and resolution beyone what your eye can differentiate, which appeals to some people. Cheap phones is what makes them #1 volume player. It's a credit to them against other Droid makers but don't see any sustainable way to knock apple out with a 5 inch screen and someone elses readily available OS as your advantage.

    So short tern if it's 400 before 500 so be it but, at least you are saying it's cheap even now if it's going to 500, which is not a huge prediction in my opinion given the fundamentals.

    I'm not sure you made a case for 400 but you got me to read your article, congrats.

  • Report this Comment On April 10, 2013, at 11:50 AM, zizala wrote:

    Apple to $400 before $500? So you are saying Apple stock will just go up. Who cares if any stock fluctuates in price, as long as the stock price increases over the longterm.

  • Report this Comment On April 10, 2013, at 11:56 AM, zizala wrote:

    Another article written by a fool that has no point, its amazing how so many columnists can write all these pointless articles daily and have absolutely no information, just meaningless rambling.

  • Report this Comment On April 10, 2013, at 5:19 PM, SyDVooh wrote:

    No it won't.

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