Apple Inc (NASDAQ:AAPL) seems to be losing steam. Despite its successful launch of the iPhone 5 and the introduction of the iPad Mini, Apple’s stock has sunk considerably, hitting a day low of $536.36 Tuesday. Share price at this level – a solid 20% down from its all-time high – seems almost unbelievable in the face of analyst recommendations that the company could reach $700 or even $1,000 a share in the near future.
Morningstar equity analyst Brian Colello explained the trend saying that while Apple Inc (NASDAQ: AAPL) stock is much lower than it has been, it is still up around 35% year to date. Moreover, fund managers and investors may well be in a sell off period right now between worries of the fiscal cliff and changes to capital gains tax. There may also be some effects from Apple’s recent management shake up and issues relating to its Maps. The company had also lowered its outlook. However, while these are factors that may serve to depress the price of Apple stock, that doesn’t mean that the share price will stay low forever.
If Apple Inc (NASDAQ: AAPL) can continue its trend of innovation, it could easily could bounce back, but it has to stay at the front of the game. Already, Apple has slipped a little in innovation, losing ground to Samsung. Morningstar’s Colello says that Apple could rebound but others see the company’s share price falling a bit more before it is all said and done with. Earlier this month, analyst Wim Lewi wrote an extended piece making his argument that Apple could very well be still highly overvalued. “I believe investors have focused too much on Apple’s sales growth as the driver for stock appreciation… margin trends are underestimated. I also believe that capital investment needs are completely ignored.” Lewi explains its importance, citing “the dire state of the Apple supply chain” and references several issues relating to the supply chain as indicators that the company may have been overvalued.
With this in mind, the analyst came up with a $500 target price for Apple Inc (NASDAQ: AAPL). That figure may have seemed low then, but that was a few weeks ago. Now, the company’s share price is well on its way to where Wim Lewi predicted. For my money, I think that Apple could be priced to buy for a long position but I do not expect the stock to rebound suddenly any time soon without some sort of a game-changing innovation.