From the fundamental prospective, it trades at 8.9x 2014 earnings ($51). Sure 2014 estimates have come down from $64 last July but so has the price. Actually, the price has fallen more. At the peak, AAPL traded at 11.0x 2014 EPS. If you take into account the amount of cash AAPL has on its balance sheet, the valuation looks even more compelling. It has $137 billion cash or $146 per share. Ex-cash, AAPL is trading at 6.0x 2014 earnings. Bottom-line, true, the latest earnings and guidance were not impressive, but lot of things have to go wrong for valuation to get extended.
From the technical standpoint, the stock is at a critical juncture from 3 prospectives (1) it is at the long-term trend-line that it established since 2003, (2) it is at the 38.2% retracement from all time high and (3) it is at the level where it "gapped up" above the trading range in January 2012, and started to make a parabolic up-move. It is very critical that APPL holds the $430 level.
AAPL will not just bounce off from current level because there are traders who are betting on it to get even lower, say $380 level. Those bearish traders have to be washed-out before it heads upwards. The only way those guys are going to give-up is for the stock to hold-up against the downward pressures. A catalyst would help. There are several potential ones (1) new product launch, (2) share buyback, (3) dividend increase or (4) stock split (remember CRM last week). Product launch is probably difficult since Tim Cook is no Steve Jobs. But unlike Jobs, Cook takes conventional corporate actions (remember the dividend payment) so #2, #3 and #4 are more likely. Stay tuned.
