For the second time in six months, Apple Inc. (NASDAQ:AAPL) stock has fallen below $100.
Back in late August, it was a marketwide “flash crash” — resulting in a 1,000-point drop for the Dow Jones Industrial Average — that sent AAPL stock crashing lower, but just as quickly as AAPL fell to $92, it recovered to close above $100 on that same day.
And while the current crash in Apple stock is coming amid some tough trading for the broader market, too, this time around feels much different. AAPL’s losses have been more consistent, and there does not appear to be any end in sight.
With that said, should investors use these losses as an opportunity, or stay clear of AAPL stock during the foreseeable future?
What Does Apple’s Chart Say?
Apple stock has been in a downtrend for the past six months or so, but many investors held on hope that $100 would prove to be strong support given its psychological importance.
That thesis did not play out, as AAPL stock fell quickly below $100, plumbing below the figure on Thursday, and the price level appears to be turning into resistance.
There are other reasons AAPL stock owners should be worried.
For one, Apple’s chart shows a very clear head-and-shoulders pattern, which can be seen above. The final “shoulder” of this pattern occurred back in October when AAPL stock tried to surpass its 200-day moving average.
The fact that AAPL fell below its 200-day moving average is bad in itself, but the fact that it was unable to break through the 200-day MA resistance is even worse for the short-term direction of the stock.
Apple’s stock price is not necessarily in uncharted territory, but these factors collectively are reasons for concern. Furthermore, Evercore technician Rich Ross recently explained that AAPL stock has no real support level in sight, and could actually fall to a price of just $72!
In other words, technically speaking, most signs are pointing lower.
However, if your investment paradigm is long-term value investing … well, then you might find value in AAPL stock right now.
That is, if you don’t mind the short-term risks that come with owning it.
AAPL Stock for the Long Run
The drubbing in Apple shares has only turned an already good value into a great value.
At the end of the day, AAPL stock trades at just 5.5 times next year’s earnings minus cash, and even with cash, it’s a low 9.1. The beating also has pumped up Apple’s dividend yield to above the 2% mark.
Besides being cheap and paying a decent dividend, Apple is also right in the middle of a $140 billion buyback plan. If AAPL management chooses to accelerate buybacks with the stock beaten down, it could very well create enough buying pressure to prove all the negative technical indicators wrong.
There’s no question that Apple stock is a short-term risk, so retail investors should tread carefully. But still, even with that short-term risk, Apple is presenting long-term value not seen in many large-cap companies in the market today.
Therefore, depending on your investment goals, AAPL stock might be a near-term short … but it’s a great long-term buy now, and especially on any dips.
As of this writing, Brian Nichols was long AAPL.
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