Why Apple Stock Is Ripe Once Again for a Correction

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Happy New Year? When it comes to Apple (NASDAQ:AAPL), one analyst is warning investors to make a resolution to take profits or risk holding a less-healthy AAPL stock with hidden blemishes. Let me explain.

AAPL Stock: Why Apple Stock Is Ripe Once Again for a Correction

Source: View Apart / Shutterstock.com

It was a stellar year for Apple stock. The tech giant reclaimed its status as the world’s largest company in a very big way in 2019, as shares rocketed higher by 86%. Apple stock also blasted past 2018’s all-time-high by around 39% and easily cleared the $1 trillion market capitalization barrier to make those gains even more impressive.

Apple’s amazing rally looks even sweeter given its relative outperformance versus the market’s second largest entity, Microsoft (NASDAQ:MSFT). And to be clear, MSFT stock’s 55% return isn’t exactly small potatoes either. Additionally, shares of AAPL stock nearly quadrupled the Dow Jones Industrial Average very healthy gain of 21%.

In total, the takeaway there isn’t a blemish to be found on AAPL stock. However, one market veteran disagrees and is warning about Apple’s prospects in 2020.

Is Apple Stock Overpriced?

Well-known tech investor Paul Meeks warned on Friday Apple stock’s bullish run has put investors “in a dangerous position.” He assessed fair value for the device maker at $170 — behind wildly-popular products such as iPhone 11, Apple Watch Series 5 and now Apple+. That amounts to a steep discount of around 55% from today’s near-$300 price tag.

Behind the forceful warning, Mr. Meeks cites Apple’s hardware business — which relies so heavily on the company’s iPhone — isn’t healthy. The business continues to deteriorate amid a global smartphone market that hasn’t shown any interesting growth since 2015. Moreover, the space has matured similar to the PC market a couple decades ago.

Furthermore, it’s not AAPL stock’s only issue either. Wall Street has grown increasingly excited by Apple’s transition into a software-as-a-service (SaaS) company, but Mr. Meeks contends investors have gotten ahead of themselves. By his reckoning, the company is only in the middle of this critical shift within its overall business model.

This isn’t Mr. Meeks first warning on Apple stock. The investor actually turned negative on shares at the end of last April. Before you laugh, though, the timing of that call couldn’t have been any better, as AAPL preceded to correct by 20% over the next month; But Mr. Meeks isn’t your typical bear either. The firm does continue to own AAPL shares for clients as an underweight holding. Bench-marking standards and Apple’s iconic brand were offered as reasons for not completely pulling the plug.

Still, the tech investor has no intentions to buy additional AAPL stock unless shares fall at least 40% from current prices. But before you chuckle or snicker for a second time, if the price chart has any say, there’s every reason to see the possibility for another correction in Apple versus significantly higher stock prices as we begin 2020.

AAPL Stock Monthly Chart

As the monthly chart reveals, last year’s bullish conviction has pushed Apple shares outside the upper Bollinger Band.


Click to Enlarge

Source: Chart courtesy of StockCharts.com

Stochastics has also just moved into overbought territory, and together, they’re solid indications Apple’s momentum has become too aggressive. Coupled with the AAPL stock price challenging a long-standing channel resistance line dating back to 2016 and shares piercing a key Fibonacci extension zone, it’s a very good time for Apple bulls to reduce risk.

Bottom Line on AAPL Stock

Overall, maybe Mr. Meeks won’t be able to buy AAPL stock in 2020. Mind you, he is waiting on a correction of 40% or greater. More importantly, though, the price chart dictates other vested stakeholders take prudent action today, wait for the Apple story to sour and allow shares to show a blemish or two before buying in your own investment account.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2020/01/apple-stock-ripe-again-for-a-correction/.

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