With Apple (AAPL 0.85%) stock trading below $400 per share during Monday's trading session -- and managing to close just above that level -- many investors may be wondering how critical holding that price may be for the near-term future. Last time Apple stock traded below $400, it was short lived, but the level continues to be of psychological importance. Several recently dropped price targets have put pressure on shares, but the underlying dichotomy remains a struggle between the perceived value of Apple stock relative to the seeming stagnation in Apple innovation.
Analysts are losing faith
Price targets on Apple stock have been lowered twice already this week. On Monday, Jefferies lowered its price target to $405, and this morning, Oppenheimer dropped its price target from $480 to $460. Ittai Kidron of Oppenheimer cut his estimates for June quarter iPhone sales by 1 million units, leading to the lowered price target. While the estimate remains significantly above the current price of Apple stock, the lowered expectations are the latest sign that analysts and investors are concerned over Apple's future.
There are positives for Apple stock
It would be unfair to suggest that Apple has not delivered any good news upon which investors can rely for positive motion. A recent article from BGR begrudgingly acknowledges that most users prefer the new icon design that Apple will release with iOS 7. The company recently rolled out iTunes Radio, which is expected to be a legitimate threat to Pandora, largely because the service will easily allow users to integrate songs they like on the radio into their iTunes purchases. This feature will allow Apple to monetize the service in ways Pandora has not been able to thus far.
Additionally, the company recently announced a few new alliances that should bolster the appeal of Apple TV. Users will now be able to get WatchESPN and HBO GO right through Apple TV, providing enhancement to what many hope is only the precursor to Apple's smart TV. Apple stock needs a big and impressive release to serve as a catalyst for the shares, as well as to remind investors why Apple deserves their patience.
Now what?
With Apple stock hovering around this critical level, there are a couple of ways to play the stock, depending on your perspective and time horizon. Fools are long-term investors, meaning that what the stock does in the next several trading sessions should be less important than what it does in the next several months, quarters, or years. There is certainly an argument to be made that the wait-and-see attitude makes sense. With the Federal Reserve hinting at the end of quantitative easing, many believe the stock market rally is in jeopardy. Apple stock would like be carried lower if there is a market correction or sell-off.
For the longer term, however, Apple remains a cash-rich, market-leading company with a bright future. There may or may not be more attractive times to buy leading into the releases that are expected this fall, but over the coming quarters, it would be a mistake to think Apple's time is over. Increasing skepticism is hard to avoid, but it may provide a great buying opportunity for a great stock.
