Apple Drops Below $400, Can Anything Turn the Stock Around?
Mon, Apr 22, 2013
Is Now A Good Time To Buy Apple Stock
Is Now A Good Time To Buy Apple finally?
Apple shares fell below $400 for the first time since 2011 last week.
And you can’t say we didn’t warn you.
We first warned about the problems coming to Apple and how dangerous its shares are as an investment in Five Reasons why Apple is NOT a Buy.
Then again a few days later in Apple: A Victim of Its Own Success.
Then we came back eight months later to check on our thesis and how it was playing out perfectly, No Surprise Here: The Real Reason Apple Shares Are Plummetting
But now Apple shares are down 45% from their recent (and ludicrous, see above) all-time highs and Wall Street seems to have pinned its hopes of a turnaround in Apple shares on one product – the upcoming iWatch.
Bloomberg notes in its preview of the i Watch that “This can be a $6 billion opportunity for Apple.”
That’s all well and good for Apple. And we certainly expect the iWatch to be a great success. Apple’s brand loyalty and focus on quality and user experience is so strong that’s an easy bet to make.
However, we don’t see how there will be a massive impact on Apple’s bottom line.
Apple posted net income last year of $42 billion. So even if they sell 100 million watches in the first year at $200 each with a net margin of 30%, that’s only an additional $6 billion of net income.
That’s good, but it’s not enough to force an overhaul in the valuation of the company and send shares significantly higher.
Right now the trend is still down. There’s no reason to expect it to turn around anytime soon. And if it does turn around, there’s no rush to buy Apple because it won’t be delivering the explosive returns it had between 2009 and 2012.
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Executive Editor, Contrarian Insights
The Group of Big Investors in United States.
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