Wednesday 04 January will be a date that many Apple investors will remember for a long time to come. The mighty Apple announced after trading hours a sales warning that promptly pushed the company’s share price 10% lower. This was the first time in the last 15 years that the company has issued such a warning. Management also revised the quarterly outlook negatively, adjusting the initial range between $89 and $93 billion to just $84 billion.
The main reason mentioned was the declining sales of iPhones in China, where economic growth is declining. The trade war between the US and China is also cited as a reason for the disappointing outlook. Apple is the third largest company in the S&P500 and therefore this warning also has a serious impact on the global stock exchanges.
Such prices automatically raise the question whether this sharp fall in prices is perhaps the ideal time to add the company to the equity portfolio. Despite this disappointing news, the company has built up a rock-solid reputation over the years and – not unimportantly – it has a phenomenal amount of cash ready to be put to work.
Those who have a long-term investment horizon and buy shares periodically will certainly be pleased with the current prices. As long as the investor realizes that a stock that has fallen sharply can still go (much) lower, there is no problem.
However, if you are mainly looking for that one ideal entry point, we would advise you to wait and see for the time being. Something we already did in our general outlook for 2019 (you can read the article by clicking this link).
The monthly chart above shows the price development since 2008, the price fall since the summit of October 2018 can undoubtedly be called spectacular and cannot simply be dismissed as a temporary dip. In the last months of 2018, the share price has rapidly decreased to the price level of early 2017! As a result, the price is now almost at the level of an important summit from mid-2015, which will obviously provide the necessary resistance.
Technical Rating | 0/10
Setup Rating | 4/10
> Both the long and short term trends are negative. It is better to avoid buying stocks with negative trends.
> 80% of all other stocks performed better in the past year than AAPL.
> AAPL is part of the Computer And Office Equipmentindustry. There are 50 other stocks in this industry, of which 70% are performing better than AAPL.
Fundamental Rating | 7/10
> AAPL’s Return On Assets of 16.28% is amongst the best returns of the industry. AAPL outperforms 95% of its industry peers. The industry average Return On Assets is -0.45%.
> The Price/Earnings Ratio is 11.94, which indicates a very decent valuation of AAPL.
> The Earnings Per Share has been growing by 15.96% on average over the past 5 years. This is quite good.
> The Piotroski-F score of AAPL is 7.00. This is a strong score and indicates good health and profitability for AAPL.
Apple is definitely one to keep an eye on. As soon as the general market sentiment recovers, Apple may become an interesting candidate to have in the equity portfolio. But for now it is too early to take action, trying to predict the price bottom is a game that you just can’t win.