Please ensure Javascript is enabled for purposes of website accessibility

Will Apple Tumble Below $400?

By Doug Ehrman - Apr 9, 2013 at 11:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple nearly broke its 52-week low last Friday and may head lower.

At the end of January, I predicted that Apple (AAPL 3.19%) 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 (FB 3.86%) announcement of Facebook Home has the potential to pressure Apple sales, as the platform exists solely on Google (GOOGL 2.84%) 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$147.11 (3.19%) $4.55
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,321.01 (2.84%) $64.13
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
FB
$198.62 (3.86%) $7.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.