With shares of Apple (NASDAQ:AAPL) touching below $500 on Monday for the first time since February, is the world’s largest publicly traded company an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement?
Although Apple conducted a massive product refresh for the holiday shopping season, the stock price has been unable to gain momentum to the upside. Shares officially entered bear-market territory in November and downgrades are now entering headlines.
Citigroup (NYSE:C) and its team of three analysts assigned to Apple cut the company to Neutral from Buy on December 16, and lowered its price target to $575 from $675. The downgrade comes less than a month after the firm initiated a Buy rating on Apple. Citigroup explains, “Near-term supply chain order cuts, while inconclusive in nature, bring into question the strength of iPhone 5 and refocus investors onto risks in the Apple story.”
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Last week, analysts at UBS (NYSE:UBS) and Jefferies also cut their price targets on Apple, but still maintained Buy ratings. Additionally, a picture circulating the Internet showing only two consumers waiting in line for the iPhone 5 in China may have weighed on shares. However, analysts are often late to the party and Apple announced on Monday it sold 2 million units in China, making the iPhone 5 the best iPhone launch in China to date. Investors should also note that a new reserve system was in place in Hong Kong for the iPhone 5, limiting the amount of crowds waiting outside of Apple outlets. By the end of December, the iPhone 5 will be available in over 100 countries.
The fundamentals on the balance sheet have not changed…