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Apple stock hits 7-month low; time to sell -- or buy?

June 20, 2011 |  4:05 pm

Apple Inc. shares fell for a fourth straight session Monday to nearly a seven-month low, sparking more debate about what ails the longtime market darling.

The stock slid $4.94, or 1.5%, to $315.32, its lowest closing price since Nov. 30. The price has fallen 13% from its record high of $363.13 on Feb. 16 and now is in the red 2.2% year to date.

The stock market overall, and tech stocks in particular, also have been weak this spring. But Apple flamed out well before the April 29 peak in the Dow Jones industrial average, the Nasdaq composite and other major market indexes.

Applehg Some investors could just be disappointed by the lack of a new iPhone model this spring, something they’ve gotten used to in recent years. The updated iPhone 5 isn’t due until fall.

It also probably didn’t help that J.C. Penney Co. last week nabbed Apple exec Ron Johnson, the brains behind Apple’s stunningly successful retail stores.

But veteran tech analyst Henry Blodget at the Business Insider argues that a long-standing issue again is weighing on Apple: the health of co-founder Steve Jobs, who is battling cancer. Jobs took another medical leave of absence in mid-January and appeared gaunt at a rare public appearance earlier this month.

“Investors are still in the dark about who will run Apple if Steve Jobs doesn't return -- as well as when this question will finally be answered,” Blodget wrote Monday. “The longer the Steve question remains unresolved, the more investors will worry that Apple is in a state of semi-paralysis, in which everyone -- including the company's senior management -- is waiting to see what will happen.”

But if Apple’s in a state of semi-paralysis, it’s coping pretty well: The company posted earnings of $5.99 billion, or $6.40 a share, in the quarter ended March 26, up 95% from a year earlier on sales of nearly $25 billion, as iPhones and iPads flew out the doors.

Wall Street analysts remain almost universally bullish on the stock, with 12-month price targets mostly between $400 and $550 a share. (Contrarians, of course, would say the Street's overwhelming faith in Apple is an invitation to disappointment.)

Even market darlings can see their shares stall out periodically. As the broader market struggled, Apple’s stock treaded water from late April through August of last year before rocketing again in the fall.

For some potential Apple investors (or at least, traders) the stock’s chart pattern may be the most worrisome issue at the moment: The share price Friday fell decisively below its 200-day moving average of about $326. For chart-watchers, a stock’s decline below its 200-day moving average is a red flag, suggesting a serious loss of momentum that could cause more short-term players to bail out.

But with Apple’s shares trading at 12.7 times analysts’ consensus earnings estimate of $24.88 a share this year, analyst Andy Zaky of research firm Bullish Cross slapped a new “buy” rating on the stock Friday. Zaky, who says his firm has had the most accurate track record in predicting Apple’s financial results, thinks Wall Street is expecting too little in earnings in 2012.

“Those buying the stock today with a two-year horizon will make 56.3% on their money,” Zaky wrote. “The market will do what it can to shake everyone out of their positions. Keeping a level head during this obvious shakeout attempt will be met with significant rewards in 2012.”

-- Tom Petruno


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Photo: Apple's campus in Cupertino, Calif. Credit: Christoph Dernbach / European Pressphoto Agency