The Apple sell-off today has been utterly hopeless, with shares breaking through $400 for the first time in more than a year. The last time shares were worth less than four Benjamins was before Christmas 2011. Still, is even more pain in store? Could Apple head to $320 next?
That's the case that Creative Global is laying out, with founder and analyst Carlo Besenius adding insult to injury to Apple investors today. Besenius reads the charts, which tell him that $380 is a support level from a technical analysis standpoint, but he thinks the true bottom is even lower. Decelerating sales, deteriorating margins, and intensifying competition could push shares all the way down to $320 in the coming months.
Besenius' claim to fame is when he downgraded Apple to "sell" last October before shares cratered from all-time highs. Specifically, shares were trading around $685 at the time of his call, and two months later he assigned the Mac maker a price target of $420. In February, Besenius further dropped his price target to $320, so today's research note is more of a reiteration of that previous premonition.
I'd normally say that at $320, Apple would be trading at 7.3 times earnings or that its cash position would equal 46% of its market cap, but recent history shows that Apple's fundamentals are futile, since the stock trades purely on momentum and emotion these days.
The news that Cirrus Logic expects lower iDevice volumes has caused both companies to plunge today. The data coming out of the audio-chip specialist lends some credibility to Besenius' pessimism, since Apple was responsible for 91% of sales in the previous quarter. iPhone weakness could definitely manifest itself in Cirrus Logic's results.
Not long ago, the idea that Apple might trade at $320 would have seemed ludicrous, in part because of the fundamentals. These days, anything seems possible, as Apple's upcoming earnings and difficult June guidance could further terrify investors into dumping their shares, while fundamental valuation will continue to be meaningless.
One of these days, fundamentals will matter again. In preparation of that day, investors are wondering whether Apple remains a buy from a fundamental perspective. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.
Copyright © 2009 The Motley Fool, LLC. All rights reserved.