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Is Apple Stock A Good Buy or Caution Needed?

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Highlight:

  1. Apple stock is currently trading its low level P/E and this  is a good bargain for the long term investors
  2. Apple Stock weekly chart is currently on the  50 % Fibonacci retracement level, a good sign from technical indicators.
  3. Apple is relative is low in comparison to S&P 500 and Dow Jones index that could lead the stock to more down side for short run.

Apple stock is most discussed stock right now. Apple is the largest company in the USA is not the only reason, rather Apple stock recent earning miss and Legendary investor Car Icahn sell off his position is the main reason for discussion. Apple stock price is now in a critical level. Long term investors are even started to think whether holding apple  is a good strategy or reduced apple position in portfolio would be better idea. Apple has some advantages for its investor to hold the stock and currently stock also showing some uncertainty in its future growth.

P/E Ratio:

One of the advantages for the apple is that apple P/E ratio is relatively low. Currently apple P/E ratio is 10.37. Apple stock long term average P/E ratio is 13.74. Apple Minimum P/E ratio in the last 5 years was 9.32 and highest P/E ratio was 18.51 in November 2014.  From valuation perspective , Apple stock is highly attractive bargain for the investors as current P/E ratio is close minimum p/E ratio and P/E ratio could be as high as 18.

Another attractive point for the stock trader is apple stock price is relatively cheap in comparison to other related stock in the market. For example,   Intel P/E ratio is 12.7 and cisco P/E ratio is 13.0 7 currently. Technology ETF QQQ P/E ratio is 19.73.  This P/E ratio of Apple stock make it attractive to the long term investors.

Technical Analysis:

Apple Current weekly chart look bullish for long term investors. As we see Apple stock chart is currently on the 50 percentile point of Fibnacci retracement level in the weekly chart. Apple strong support line is 92. Apple got support on this point as market entered in the official correction range in 2015 and 2016. Currently apple stock is just moving around this support line. This point can be strong support line for the apple again if market starts to move upward again.

Weekly Apple Stock chart
Weekly Apple Stock chart

Apple  is great for its above mentioned advantages. But apple  really has something to concern about or at least recent price action of apple stock chart   proves that investors has low confidence on the stock. Lets see why apple  is showing weakness while Dow jones index and S&P 500 was trying to hit all time high few day ago and apple just launched new product

 

  1. Chinese market expectation:

Apple next big target was to enter into Chinese market and tap all the untapped mobile consumers. Apple had  an expected  figure to reach within 2016, apple product failed to reach that target. Apple sales is down 26 % in greater china including Hong Kong, Taiwan than previous year. Apple sales is also down 11% in main land china than the previous year.   This is big blow for apple stock because other developed countries mobile market is already saturated and very little chance to boost up mobile consumers. Failed in Chinese market indicates in future apple has no big market for iPhone consumer.

  1. APPLE SE Failure:

Apple launched new product apple SE few days ago. One of the target for iPhone SE  to  enter  Indian market with low price apple product and tapped consumers who wants to get low price apple product. Apple SE sales data is not available comprehensively. One thing we can assume that iPhone SE will replace other iPhone consumers and will not be as successful as other iPhone products.

  1. Apple Stock Earnings:

Apple missed its last Quarter earnings. Apple stock price fell down 8 % after earnings report and stock lost total 47 billion market value. Apple net revenue fell down 22 % or $1.09 per share.

  1. Innovation:

Apple is a technology company and innovation is core strength of its growth. Apple was successful to bring new innovation to the industry and use its right way. However, Current CEO failed to bring any innovative product that was highly successful. Apple failure to bring successful product for the consumer could lead to the same fate as what happens to once mobile giant and market leader Blackberry.

  1. Technical Analysis

    This is true that apple Stock chart  is currently on the 50 % Fibonacci retracement level and Stock is holding around the strong support zone around $92.However, apple stock daily chart shows that apple stock is more prone to the down side.  Apple stock 8 % gapped down after earnings below the all major moving average   made apple stock a weak candidate the short run. After big gap down, we see a bounce from the stock to the upside. Apple  did not show any strong bounce to the upside rather we see stock is gradually heading lower a signal for the   down side move. Even in the market up day apple is down 1% shows apple relative weakness and lack of confidence from investors.

Apple stock Chart
Apple stock Chart

Apple  daily chart shows Chart still has the room to go downside. Any close below $92 could initiate massive sale off to the down side. Apple stock chart shows next possible support for apple is$ 82 level.

Bottom Line: Apple Stock is currently on the critical level. Stock can break  to upside or down side depends on the how market performs and stock own strength. Apple Stock chart shows that apple is more prone to the down side rather than upside.

 

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