Apple Inc. (AAPL) — I last covered AAPL stock in the Trade of the Day on June 30, but recent news and price action warrant an update.
Despite its dominant position in the tech world and high customer satisfaction ratings, the company’s newest product, the Apple Watch, appears to be bombing. According to a MarketWatch article, “Data released over the past few weeks have painted an ugly picture of the Apple Watch’s initial months.”
In early July, research firm Pacific Crest said demand for the gadget appeared to be “slowing quickly.” Its analysts reduced their unit sales estimate for fiscal 2015 by 500,000 to 10.5 million and cut their fiscal 2016 estimate by 3 million to 21 million watches.
RBC Capital Markets said Apple “botched the launch” by failing to make a compelling case for consumers to purchase the device. And a study by Endeavour Partners found that users have a tendency to quickly lose interest in wearables.
But Capital IQ believes the Apple Watch will be successful over time, and its analysts have a 12-month price objective of $150 on AAPL stock.
Wednesday’s news of a massive sell-off in Chinese equities contributed to a 2.5% decline in AAPL stock. FactSet reports the company derives 16.2% of its revenue from China.
Following a run from about $80 in April 2014 to over $134 in April 2015, AAPL stock has been consolidating in a rectangle that has resistance at roughly $133 and support at its May low of about $123.
However, on Wednesday, shares broke below $123 on high volume following two months of higher-than-average liquidations. Initial support now rests at $119, but a break from the rectangle gives a downside target of $113 for this very active stock.
Therefore, I am reducing my buy under price for AAPL stock to $115 from $122. My 12-month target of $150 is unchanged.
