Apple's Recent Dip Shouldn't Alarm Investors

Competitors have yet to put a serious dent in iPhone 5 momentum, says Morningstar's Brian Colello.

Brian Colello, CPA 10 December, 2012 | 12:28PM
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We are maintaining our fair value estimate for Apple (AAPL) despite a 9% stock decline last week and a bout of recent selling pressure. We believe many factors are at play regarding the stock price decline from an intraday high of $705.07 on Sept. 21 to an intraday low of $505.75 on Nov. 16.

Investors Locking in Gains

Primarily, we believe investors have been taking gains in Apple, as the September price of $705 represented a 74% gain in nine months. We believe that such profit-taking was exacerbated in early November by US President Barack Obama's re-election, which appears to have heightened concerns about the US fiscal cliff and higher tax rates on investment capital gains. Since Apple was probably the largest investment holding and/or the biggest 2012 winner for many investors, we suspect the stock has likely been a casualty of any profit-taking or trimming of holdings by large investors. More recently, we suspect that technical investors are steering the Apple boat, as evidenced by the massive recovery in the 12-trading hours following the Nov. 16 low of $505, as the stock catapulted back to $566 by the end of the following trading day.

We believe investors have been taking gains in Apple, as the September price of $705 represented a 74% gain in nine months

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Alphabet Inc A2,638.00 USD-1.59Rating
Apple Inc146.77 USD-1.49Rating
AT&T Inc28.20 USD0.07Rating
China Mobile Ltd47.90 HKD-0.31Rating
Nokia Oyj4.91 EUR-1.48Rating
Verizon Communications Inc56.20 USD0.75Rating

About Author

Brian Colello, CPA  is a senior stock analyst with Morningstar.

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