Can Apple (AAPL) Kill the Bear on its Back?

November 8, 2012 10:55 AM EST Send to a Friend
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For the first time in a long-time, Apple (Nasdaq: AAPL) investors are getting nervous. Has the consumer love affair ended? Can Tim Cook handle this? Where's the innovation? Are margins safe? These are all questions that are going through the minds of investors.

Since hitting an all-time high of $705.07 on September 21, the day the iPhone 5 launched, shares are down an astonishing 22 percent and are officially in bear market territory. Analysts, however, are sticking to their guns.

Topeka Capital's Brian White, the most bullish analyst on the Street with a $1,111 price target, for one isn't worried.

He said the correction is similar to the other three over the past 13 months. "Apple's stock has clearly been under selling pressure in recent weeks as the negative news cycle has accelerated and the Apple bears are now making the case for why the Company has lost its edge," he comments. He also thinks Apple may susceptible to tax-related selling before an increase goes into effect in 2013.

White notes that corrections of 15% or more have occurred four times over the past thirteen months. A 16% decline (peak to trough) was experienced in Sept-Oct of 2011 and a 15% decline in Oct-Nov of 2011, followed by a 19% decline in April-May of 2012. All were followed by massive rallies in the stock.

He sees this as another buying opportunity. "Similar to other corrections in Apple's stock, the fears in the back of investors minds come to the forefront and the bear stories gain credence," White comments. "We have heard it before, we're hearing it now and we expect to hear it again in the future. However, these concerns have proven dead wrong over the years and based on the product lineup at Apple, we believe they will be dead wrong in the foreseeable future. With Apple trading at just over 8x (ex-cash) our CY13 EPS estimate, we believe that those investors that have missed the Apple rally over the past year are presented with a very attractive entry point heading into the strong holiday news season. The iPhone 5 and iPad mini are blockbuster new products that we believe will prove to be big hits this holiday season and into 2013, combined with the new iPad, MacBook Pro, iMac and iPod lineup."


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