Apple (NASDAQ:AAPL) — Earnings growth has been spectacular, averaging 72% in the past five years. However, sales growth is expected to fall to 14% for fiscal year (FY) 2013 compared with a 45% rise in FY 2012, and the growth estimate for FY 2014 is just 13%. The stock had a spectacular run last year, up 70%, to a high of over $700 from $405. But after September’s high, the stock suffered a violent reversal into a bear market, and every attempt to break the bear market’s resistance line has failed.
On Tuesday, Apple beat estimates, reporting fiscal Q2 earnings per share (EPS) of $10.09 versus $12.30 last year, but its outlook fell short of expectations. Some investors were encouraged by management’s decision to raise its dividend by 15% to $3.05, and the additional $50 billion it added to its existing stock-buyback program. But this move is not characteristic of the dynamic growth company that Apple once was. It appears to indicate that management has few new products in development in which to invest — a sign of a maturing company that demands a lower price due to an expected lower growth rate.
The Trade of the Day has been consistently bearish on AAPL since October 2012. I first suggested a short sale of the stock on Oct. 9 at $638, then again on Dec. 6 at $529, Dec. 17 at $509, and Feb. 28 at $444. The last short sale had a target of $400, which was achieved on April 17.
Traders should sell AAPL short again on a reactive bounce to its 50-day moving average at $436 with a target of $360, which is the bottom of a support zone formed in 2011.