Could Apple Be Broken?

There is no dearth of Buy recommendations on Apple’s (NASDAQ:AAPL) stock, but the share price is yet to stabilize from when it first start tumbling from its September peaks and, according to some, may have lost its momentum from last year. Apple gained a healthy 31.4 percent in all of 2012, but after touching a closing record high of $701.10 in mid-September, fell more than 24 percent until the end of the year. The start of 2013 has not been particularly friendly either, with the stock down more than 6 percent until now and hitting an 11-month low last week.

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Apple’ stock through 2012:

Apple 2012 Move

According to Mark Mulholland, the manager of the Matthew 25 fund that has about 17 percent of its holdings in Apple, the company was in obvious need of a positive catalyst that could have a sustained effect. “Three things influence a stock price: growth, value and momentum,” Mulholland told Reuters. “The growth and value are there, but you’ve completely lost your momentum.”

The Matthew 25 fund gained a substantial 29 percent last year, but lost 2.8 percent in the last quarter to coincide with Apple’s slump. Mulholland still values Apple at more than $1,000 per share, but insists the responsibility of making amends lies with the company. “If the company is not buying back at this level, I think it’s absurd and suggests that something is seriously wrong with the company,” he said.

According to Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, even at these low prices, it was hard to find an entry point into the stock. “There’s been a lot of technical damage, but at the same time it still looks like it’s in a downtrend,” Detrick told Reuters. “This could still be a name you want to avoid and could very well still underperform in our opinion.”

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However, with the earnings report of a traditionally blockbuster holiday quarter around the corner, the idea that Apple can turn things around is also alive. The iPhone maker is scheduled to report on January 23.

“It seems like there’s an avalanche of pessimism about the Apple franchise,” Channing Smith of Capital Advisors, which has owned Apple shares since December 2009, told The Wall Street Journal. “We just don’t think it’s warranted.”

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