Downtrend still intact. Apple Stock Price Forecast to Collapse to $50 Target By 2014
It is official Apple is one weak stock right now. It is supposed to be a tell when the market is up, and your down considerably to the tune of 3%. The Jim Cramer tax selling notion can now be dispelled as well. This is the new year, and for Apple shareholders the misery of the third quarter is repeating itself.
After a bump up with the entire market at the beginning of the year, a 300 point rally can lift a lot of boats; the sellers loved that entry point to reassert this stock on the downtrend it has been on since the 700 dollar level.
So what is really going on in Apple? What are the reasons for this Wall Street darling losing favor to such a degree? Where is this stock ultimately heading in regards to a price target? These are some of the things that I am seeing with the fundamentals of the Apple business model.
Overvalued Market Cap
Apple was way overvalued when their market cap was more than 3 very large fortune20 companies, that should have been a huge red flag to investors to get the heck out of this stock. The numbers just don`t add up for what is essentially a glorified hardware provider.
I know Apple markets themselves as more than this, but that is all marketing hype! They may be a creative and stylistic device maker but in the end they are in an industry which is one exemplified by compressing margins and prices.
In other words, the technology industry is a genre where prices and margins historically compress once new technology is introduced and becomes adopted by the masses unlike education or healthcare where prices continue to escalate higher.
The crowded trade effect of Wall Street, remember five years ago when RIMM was a Wall Street darling, and a huge momentum stock by all the fund managers. Every fund manager had to have RIMM in their portfolio it was a given, and that stock split, kept going higher, and on and on.
Each year there are 10 large stocks that most of the fund managers get into, and four or five that every fund manager must own, the momentum stocks for the year. And whether it is NFLX, or CROX, or MCP it is great when you're on the right side of the momentum play, but when the party ends, the rush to the exits takes forever, and is one nasty fall from grace.
The problem is that valuations become so distorted that Apple at $500 looks like a discount, appears to be on sale, a big value trap waiting for unsuspecting investors.
But mark my word, there may be earnings surprises, and good quarters along the ride, but every jump in the stock will be sold into heavily, and the stock will continue to put in lower highs and lower lows as margins compress, and investors look for better opportunities in other areas.
Eventually $400 appears in sight, then $300, $200, $100 and MARKET'S target of about $50 a share as the company reaches the Microsoft, Dell, Hewlett-Packard, and Intel phase of a maturing Tech Company. Apple better have a hefty dividend by then or $50 will not be the bottom for this aging dinosaur.