Anderson On Apple: Watch Volume Closely, It Was 70% Higher Than Average On Thursday
The bank noted four reasons the tech giant could be trading down -- China, poor Watch demand, smaller buyback and hedge fund/mutual fund activity.
On Friday morning, with Apple up over 1 percent in pre-market trading, MND Partners' Tim Anderson discussed the stock. It "was the “Buzz” early afternoon, briefly trading below $120 and threatening its 200 day [moving average] of $118.75," he wrote. Because Apple failed to make new highs during market peaks in May and June, Thursday was also an "outside reversal day," in technical terms.
Perhaps most importantly, Anderson pointed out how many people were trading Apple on the day shares declined. Thursday's volume of 77 million shares was 70 percent higher than its average daily volume, and behind only Bank of America.
In fact, Apple shares changed hands at nearly twice the rate of the next most active stocks, Intel and Micron.
The Next Step
So, what's the immediate takeaway from this information? There might not be one.
According to a 2003 study by MIT's Walter Sun, trading volume and stock prices have a "complex" relationship to say the least. Findings suggest when a stock is trading more frequently, it leads to larger price changes, though there's no way to know which direction those prices will go.
What is better understood is this: Long-term stock prices generally rise in step with earnings expansion. Apple's earnings have grown an average of 15.1 percent over the past three years, and analysts on Wall Street expect growth to continue.
Tipranks reveals the average Apple analyst holds a price target of $152.26 -- an upside potential of more than 26 percent.
This group is led by Cantor Fitzgerald's Brian White ($195 target) and FBR's Daniel Ives ($185 target). The only analyst who holds a price target near Apple's current trading range is Deutsche Bank's Sherri Scribner, with a $125 mark.
In a recent report, Scribner said iPhone growth will eventually slow and Apple will underperform the smartphone market next year. "New iPhone sales help drive outperformance versus the market, but after you acquire a customer, your sales are based on how often customers refresh their phones. In general, this refresh cycle is 2-2.5 years for smartphones," she wrote.
Apple recently traded near $121 in Friday's pre-market session.
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