Whenever there’s a panic-stricken indiscriminate selloff like the one the market just went through, traders tend to throw the proverbial baby out with the bathwater. Once they realize their mistake, of course, they quickly go back out and pick the baby up.
Apple (AAPL) just happens to be one of those babies that investors erroneously decided to dump over the past few trading days, costing AAPL 11% of its value in the last week (before Tuesday’s rebound), and 20% of its value from its peak in late July.
With the dust from the market-wide meltdown now settling, investors are starting to realize the Apple stock price pullback was overdone. Moreover, they’re correcting their mistake by buying back into AAPL as firmly as they were dumping it just a few days ago. If you wanted in, now may be the time.
AAPL: It Is What It Is
Full disclosure, I loathe Apple. Specifically, I loathe the fact that investors as a whole tend to put Apple’s stock on a pedestal, and dare not question the possibility of Apple doing something not-so-great.
But I admit, most everything Apple does is indeed great: Apple arguably makes the finest consumer technology products available on the planet, and I would contend the company ushered in — and set the pace for — the smartphone era almost entirely on its own.
At the other end of the spectrum is, of course, the Apple watch. Not only was it a solution to a problem that didn’t exist, its total sales and mass-usefulness were ultimately seen as a flop.
Nevertheless, as yours truly noted back on July 17, AAPL on its worst day is still better than most stocks on their best day. Apple’s biggest threat is its own legacy. I’ll tolerate the Apple Watch experiment to participate in the iPhone’s success, not to mention the brewing success I’m confident the company will find when it finally launches a streaming network cable-television service.
In other words, It’s not so much a question of whether to own Apple stock, but when to. Now may be a good time to get off the sidelines.
Apple Stock Behaves Just as Scripted
I’m not going to guarantee that Apple’s stock price will rise forever more from the low it hit Monday. I will go out on a limb, however, and say that Monday’s low was most likely at or near the low price we’ll see from AAPL for a while … possibly forever.
Take a look at the chart of Apple stock below. Like most stocks and the market as a whole, AAPL went through a capitulatory move yesterday. Volume spiked, and the stock plunged, only to recover the bulk of what it lost on an intraday basis. This implies the trading environment flipped from a net-bearish one to a net-bullish one. Traders have followed through on Monday’s intraday reversal effort today.
Is it possible the Apple stock price could slip back into a downtrend and put newcomers into the red right off the bat? Sure. Anything’s possible. But, it’s not very likely. Really, is it worth avoiding AAPL stock if it also means foregoing the potential upside? It could, but from where I’m standing, it doesn’t look that way.
The fact of the matter is, even with Tuesday’s marketwide bounce underway, stocks could still fall further. There’s a good fundamental as well as a technical argument for more market-wide downside. With no more sheer shock value left to impose on investors at this time, though, the next leg of any market pullback (if it materializes) isn’t necessarily going to drag Apple down with it.
Bottom Line for Apple
Why wouldn’t another bearish tide wash AAPL out with it? Like I said above, investors love Apple, and will prop it up when they may not do the same for any other stock. With the current Apple stock price of around $108, AAPL is trading at a very a palatable trailing price-to-earnings ratio of 12.5 and a very plausible forward P/E of 11.
What’s not to like?
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.