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Why I’d Still Take a Bite Out of AAPL

Jun 14, 2017

Nobody ever said that investing was a smooth ride, and not even the largest company in the world is exempt from its share of the bumps and bruises. In fact, Apple (AAPL) has hit several hurdles over the last week, starting with the mass exodus from tech stocks on Friday and culminating with a downgrade to kick off Monday morning.

The consensus behind that downgrade – and the prevailing view of a large number of analysts – is that Apple’s stock price has gotten ahead of itself and is already pricing in the potentially good news surrounding the release of its next iPhone.

It’s tough to argue that perspective. However, this is when we need to take a step back and look at the bigger picture. When you do, you’ll realize that the company has potential well beyond the prospect of a new iPhone.

Apple is continuously innovating, and as long as that remains true the stock price will only keep climbing higher over time. There will always be setbacks along the way as the shares get ahead of themselves in the short term – it happens! – but those should be viewed as nothing more than buying opportunities for investors who have longer-term time horizons.

Looking at the recent action, AAPL fell 9% from May’s all-time high to Monday’s low. That probably feels pretty bad to newer investors, but for those who bought in last year and are sitting on a big unrealized gain, it should feel like nothing more than a speed bump.

I don’t like to call bottoms, so I can’t say whether or not the current pullback is over. However, the chart shows clear price support at the $140 area (the black line) that I suspect will hold strong in the coming weeks.

For those of you waiting on the sidelines to establish a new position in AAPL, I’d consider a dip to $140 a great buying opportunity. From there, the shares have long-term critical support at the 200-day average (the red line), which is about 10% below the support area and offers a defined risk level that should not be too large for either short- or long-term investors.

Long story short: Apple continues to trade with a more attractive valuation than the overall market and its peers, yet some analysts and investors just aren’t giving the company the credit it deserves right now. They will one day, though, and when that happens this stock will be trading above $200.

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