Apple shares have suffered since its recent earnings report, losing over $200 billion in market capitalisation in less than a week. One can see why. Shares had gained almost 60 per cent from January’s lows. Clearly, expectations were high, only for Apple to announce its third consecutive quarter of declining revenues. Sales of iPhones, which account for roughly half of revenues, fell well short of expectations.
A quick about-turn is not envisaged; guidance was disappointing, with full-year sales expected to fall about 3 per cent. A host of analyst downgrades followed.
Apple’s stock still looks pricey. Over the past 10 years, notes market strategist Charlie Bilello, Apple has traded on an average of 20 times earnings, compared to 30 today. It trades on 7.5 times sales, compared to a 10-year average of 4.6.
[ Apple sluggishness to persist after third quarter of falling salesOpens in new window ]
Technically, the outlook looks uncertain. Bespoke Investment notes Apple shares fell below their 50-day moving average for the first time in 136 trading days. Looking at eight previous occasions where Apple fell below its 50-day average after lengthy spells above it, Bespoke notes shares fell an average of 6.2 per cent over the next month. Three-month returns were also mixed, although shares did well over the following six- and 12-month periods.
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That suggests it may be worth buying Apple on further weakness, but don’t be surprised if the stock goes down before it goes back up again.
