As the largest single stock by market capitalization, tech icon Apple Inc. (AAPL) pulls the rest of the market around by the scruff of the neck.
Following the death of Steve Jobs in late 2011, AAPL stock didn’t really start moving again until the buzz started building for the large-format iPhone 6 debut late last year — something even Donald Trump saw the potential in as early as the summer of 2013.
But that tailwind has come and gone, and with recent product initiatives such as the iPad Pro and Apple Watch falling flat, investors are losing faith. AAPL shares have fallen back toward their August lows, down nearly 20% from its February-July highs.
I think even lower lows are in order, and I have recommended the AAPL Jan $110 puts to Edge Pro subscribers — a position that is already up 23% with room for much more.
For one, the rebound out of the August lows was pretty ridiculous: You remember that infamous “letter” from AAPL CEO Tim Cook to CNBC stock jock Jim Cramer? It talked up the company’s China performance (a source of recent worry after the July earnings report disappointed) and long-term growth potential.
Not only did Apple stock rebound and zoom higher, but the rest of the market did as well.
Lo and behold, when AAPL reported results again on Oct. 27, more disappointment followed. iPhone sales totaled 48.04 million vs. the 48.72 million expected.
Recent chatter has focused on evidence of tepid iPhone demand from supply chain slowdowns, with Digitimes reporting overall shipments down 5% to 10% from previous expectations for Q4.
The focus now turns to rising hopes for the iPhone 7 launch in late 2016. But the writing is on the wall: The smartphone market is saturated and AAPL is badly lagging in new tech areas like virtual reality/augmented reality, Internet of Things, autonomous vehicles, and even wearables.
All the company’s efforts are on incremental improvements such as better cameras, different form factors and catch-up product releases like Apple Music — not the kind of true innovation seen when Jobs was still alive.
From here, a drop back to the 200-week moving average, last tested in mid-2013, would be worth a 17% drop from here and put the post-2009 uptrend under threat.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
