Apple Continues to Tumble After Jefferies Lowers Price Target
Shares of Apple (NASDAQ: AAPL) continued to slide on Monday, after analysts at Jefferies cut their price target on the stock from $900 to $800. Still, with shares trading near $530, analysts maintained its Buy rating.
In its note, Jefferies warned that growth could slow in 2014 with the stock's forward multiple dropping as Apple's margins decline.
Among the most interesting stock stories of 2012, Apple is certainly near the top of the list. After starting 2012 around $400 per share, Apple rapidly rallied, peaking above $700 per share for a 75 percent gain. However, since September's peak, Apple's share price has steadily dropped.
In mid-November, Apple approached $500, but then quickly shot back to about $600 in only a few sessions. In recent trading days the trend has reversed again, and should the familiar “head and shoulders” technical pattern play out, Apple appears destined to see the $500 share price once more.
Last Friday, Apple hit the dreaded “death cross” -- its 50-day moving average crossed below its 200-day moving average, traditionally believed to be a bearish trading signal. Add to that worries about the fiscal cliff, and it isn't hard to see how Apple is trading lower.
Apple has been a popular stock among traders for the last few years, and many may be sitting on large, unrealized capital gains. With the tax on capital gains likely to go up in 2013, many investors may be tempted to sell all or part of their Apple positions to avoid future tax increases.
In addition to cutting its price target, Jefferies also laid out expectations for Apple's future product portfolio.
Jefferies expects a refreshed iPhone to appear in June or July of 2013. This new iPhone would, according to Jefferies, likely be dubbed the iPhone 5S. This would be consistent with Apple's prior product launches, where the company rolled out an iPhone 4S and 3GS as successors to the iPhone 4 and iPhone 3G models, respectively.
More interesting, Jefferies expects Apple's “iTV” to be unveiled in September or October of 2013. Analysts cite Tim Cook's recent NBC appearance as evidence of a forthcoming TV, speculating that Cook wouldn't make such leading statements about an Apple television if the device wasn't near completion.
Then there's the low-cost iPhone. Jefferies doesn't believe the phone has been fully approved by Apple's management just yet. If the device is launched, Jefferies anticipates it to be unveiled alongside the refreshed iPhone in the summer.
By Jefferies' estimate, the cheaper iPhone would be priced around $200-250 and aimed at the prepaid and developing markets. Like Apple's iPad Mini, Apple may be considering the device as a way to ward off competition from cheaper smartphones running Google's (NASDAQ: GOOG) Android operating system. Jefferies thinks that a cheap iPhone would benefit Apple's market share, but hurt its gross margin.
If nothing else, Apple's shares remain volatile. If 2013 plays out like 2012, Apple's shares might be a bargain at current prices.
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