Apple Stock (Nasdaq: AAPL)
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Why is Apple Inc. (Nasdaq: AAPL) Stock Falling?
Apple Inc. (Nasdaq: AAPL) investors have cringed as the stock slipped about 16% from its peak over the last two months.
But given the absence of any catastrophic bad news, why is AAPL stock tumbling? And where will it stop?
It's important to note off the bat that Apple's fundamentals are just as strong as they were last fall when the stock began its huge run-up from just under $400 to $636.23 on April 9 (it hit an intraday high of $644 on April 10).
In short: Apple still expects to make a mountain of profit this year. Apple still has over $100 billion in cash with no debt. The company's price/earnings ratio is about 13.50 for the trailing 12 months and its forward P/E just 10.
So something else must be driving down Apple stock. Some of it is logical, some of it emotional - but none of it permanent.
Let's take a closer look:
- A Parabolic Rise: First and foremost, AAPL simply rose too far too quickly. Rapid gains beg profit-taking.
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Apple Inc.'s (Nasdaq: AAPL) "Store Within a Store" Strategy Bold But Risky
Hoping to expand its reach, Apple Inc. (Nasdaq: AAPL) is testing a store-within-a-store concept with both Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT).
Although both retailers have already been selling Apple merchandise, the new "micro-stores" will expand the current offerings (with the exception of Mac computers) and create a product experience more akin to an Apple Store.
Several dozen more micro-stores are planned, though the rollout will be gradual.
Piper Jaffray analyst Gene Munster said Apple's long-term goal isn't so much to stuff a micro-store into every Wal-Mart and Target, but to place them strategically in rural areas many miles from the mostly urban, wildly successful mall-based Apple Stores.
"We always talk about growth outside the U.S.," Munster said on CNBC recently. "The reality is, just look in our backyard. There's still a growth opportunity that no one's talking about, which is kind of outside the urban areas."
The allure for Wal-Mart and Target is the extraordinary foot traffic Apple products can generate. They're hoping that customers who come to shop for Apple products will stick around to buy other merchandise.
If the strategy works, both Apple and the big retailers win. But, as the saying goes, the devil is in the details.
In fact, Apple is no stranger to what can go wrong with the store-within-a-store concept.
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Apple Inc. (NASDAQ: AAPL) Q2 Earnings: iPhone Carries the Day
Thanks to booming sales of the iPhone, Apple Inc. (NASDAQ: AAPL) Q2 earnings far outpaced Wall Street expectations.
Apple earned $12.30 a share on revenue of $39.2 billion, compared to analyst expectations of $9.99 a share on $36.6 billion. In the year-ago quarter Apple earned $6.40 a share on revenue of $26.67 billion.
Apple sold 35.1 million iPhones in the quarter, well beyond the 30.5 million analysts had projected.
AAPL stock had fallen in recent days when U.S. carriers AT&T Inc. (NYSE: T) and Verizon Communications (NYSE: VZ) both reported significant declines in their quarterly iPhone sales. The reports raised concerns, unfounded as it turned out, that iPhone sales would miss.
That's one reason why the news was greeted enthusiastically in after-hours trading. AAPL was up $41, or 7.29%, within 30 minutes of the earnings announcement.
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Don't Be Surprised by Apple Inc.'s (Nasdaq: AAPL) Q2 Earnings
Following its extraordinary beat last quarter, expectations for Apple Inc.'s (NASDAQ: AAPL) earnings are even higher than usual.
With Apple having such an outsized influence on the markets, even investors who don't hold the stock will be watching for Apple's Q2 earnings report after the closing bell today (Tuesday).
Still, with its stock having tumbled 11% in the past two weeks, from its peak of $640 April 10, Apple needs to beat Wall Street expectations.
If Apple earnings disappoint -- as occurred in the September quarter last year -- the stock will get beaten down even further. Such negative news would push the stock toward $500.
The consensus estimates for Apple's Q2 earnings are $9.99 per share on revenue of $36.6 billion, which most analysts believe is achievable.
In fact, just in the past week several analysts, such as Shaw Wu of Sterne Agee and Bill Shope of Goldman Sachs, again raised their estimates for iPhone and iPad sales.
However, Money Morning Chief Investing Strategist Keith Fitz-Gerald isn't so sure.
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He Predicted the Apple (Nasdaq: AAPL) Sell-Off … Here’s What's Next
The recent sell-off we've seen in Apple Inc. (Nasdaq: AAPL) shares came as a real stunner to Wall Street.
But Strike Force Editor Keith Fitz-Gerald saw the sell-off coming.
In fact, he predicted it.
Back on March 27, Keith wrote a lead story for Money Morning in which he articulated seven very clear reasons that investors should consider shorting Apple's stock.
And that was a couple of weeks after he detailed a "put" option strategy - in essence, a "short" trade - that resulted in a 47% profit (in just two days, no less) for the subscribers of his Strike Force trading service who followed his recommendation (a short-term reversal delivered those gains).
I wanted to know what tipped him off that a reversal was coming - as well as what he was predicting for Apple's shares going forward.
"BP, it was clear to me that this kind of reversal was coming - and sooner rather than later," Keith said during a private briefing late last week. "The shares had soared 75% in just five months - one analyst actually described the performance as "euphoric.' Suddenly, we're seeing all these mainstream-news-media stories explaining why Apple shares are going straight to $1,000. But I know from my own experience as a professional trader that even the shares of the best companies on earth don't go straight up. I happened to time it perfectly and help Strike Force subscribers take advantage of the reversal I just knew was in the offing."
Key Questions for Apple Stock
The way we see it, the Apple stock sell-off raises these three key questions for investors:
- No. 1: What's going to happen to Apple shares in the near-term?
- No. 2: If the stock is headed for a volatile stretch, is there any way to profit until the smoke clears?
- No. 3: What's the long-term outlook for Apple - both the company and the stock?
Here's what Keith had to say.
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Is Apple Stock (Nasdaq: AAPL) the Short of a Lifetime or the New Widow Maker?
I have a confession to make.
I believe Apple stock (Nasdaq: AAPL) is going to be world's first trillion-dollar company yet I want to short the snot out of it.
Am I being compulsive?...impulsive?....or foolish?
Perhaps it is all three considering that Apple has risen more than 3,000% in the last ten years, turning almost any attempt to go against the grain into a "widow maker" trade.
I say almost because I am one of the lucky ones.
A few weeks ago I recommended my Strike Force subscribers purchase put options on Apple, effectively shorting the stock. That resulted in a 47% profit in less than 24 hours for anyone who followed along, excluding fees and commissions.
I'm not alone in my thinking.
Uber investor Doug Kass, general partner of Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP, tweeted recently that he had covered "half his short" on Apple following the announcement of their dividend and buyback plan.
Given that the stock had run up to nearly $608 a share before the announcement, presumably Kass had banked some gains, too.
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New Apple Dividend Will Help Push Shares Higher (Nasdaq: AAPL)
A new Apple Inc. (Nasdaq: AAPL) dividend will make the stock even more attractive while expanding the pool of potential investors.
Apple announced Monday that starting in September, it will pay a $2.65 quarterly dividend.
Apple also announced a $10 billion stock buyback program to be conducted over three years, beginning in September.
The stock buyback was a bigger surprise to analysts. While too small to move the stock significantly, Apple CEO Tim Cook said the intent is to avoid earnings-per-share dilution from future shares issued to reward employees.
The Cupertino, CA company's enormous pile of cash and investments - over $97 billion as of the end of 2011 - had led to increasingly strident calls for an Apple dividend in recent years.
Yet despite today's investor-friendly moves, some think Apple could have done more.
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Apple Stock (Nasdaq: AAPL) at $600: Too Far Too Fast?
After Apple Inc. (Nasdaq: AAPL) touched $600, it set off speculation about whether the stock is truly worth $600 a share.
Some consider Apple's parabolic run-up in price as a warning sign of a bubble. In December Apple was still trading under $400.
Others look at the escalating sales growth of such Apple products as the iPhone and iPad and see justification for a $600 stock, a $700 stock, or even higher.
So we at Money Morning thought it would be worth comparing Apple's annual earnings numbers with the rise in its stock price since 2006, the year before the iPhone debuted.
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Tech Stocks to Watch: Cisco (CSCO), Apple (AAPL), Demandware (DWRE)
Tech stocks continued their all-star year yesterday (Thursday) with a Cisco Systems Inc. (Nasdaq: CSCO) deal, a new intraday high for Apple Inc. (Nasdaq: AAPL), and an explosive first-day performance for Demandware Inc. (NYSE: DWRE) moving markets.
The tech-heavy Nasdaq closed up 0.51% to 3,056.37.
Here's why these are the tech stocks to watch today (Friday):
Cisco Systems (CSCO) makes play for video: Cisco Systems Inc. (Nasdaq: CSCO) announced a $4 billion deal with video-software specialist NDS Group Ltd, a small company based outside London.
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