What Barron's had to say about Apple

I re-subscribed to the magazine this week so you wouldn’t have to.

The FAANGs (Facebook, Amazon, Apple, Netflix and Google) have lost a collective $1.1 trillion in market value since their individual peaks. The question posed by the editors is “whether to swing now or wait for a better pitch.” Their answer for Apple: Not yet.

Apple is the biggest loser in terms of stock value this month. A 21% decline has erased $240 billion worth of market value, as investors grew worried about deteriorating demand for the latest iPhones. In total, Apple has lost $303 billion since its market value peaked at $1.12 trillion.

Apple’s decline accelerated in early November after the company gave disappointing sales guidance for its holiday quarter. That’s the last we heard from Apple, but the bad news keeps coming from others. In mid-November, several Apple component suppliers lowered their financial forecasts, hinting at slowing iPhone demand.

Last Monday, The Wall Street Journal reported that Apple has recently cut orders for all three of its newly released iPhone models.

A week ago, Barron’s suggested that Apple’s slide could continue. The stock is down 11% since then, but our assessment remains about the same: Investors may want to wait until the negative news flow is incorporated in Wall Street models. For now, analyst estimates for iPhone sales have remained stubbornly high. The reset will probably occur by the time Apple reports its holiday quarter in late January or early February.

All isn’t lost for Apple investors. One mediocre product cycle doesn’t change the company’s strong attributes: a bulletproof balance sheet with $123 billion in net cash, its stellar brand, a loyal customer base, and a sticky ecosystem of software and services. During the last disappointing iPhone product cycle—the 6S and 6S Plus—Apple stock fell 32% from peak to trough in 2015 to 2016. That fall has almost played out again. A similar decline would suggest a bottom of $165 for Apple’s stock. Apple closed the week at $172.29.

My take: I’m with Mark Mahaney, quoted in the intro:

Part of the selloff may have been driven by herd behavior as traders rushed for the exits at once. “It was an unwinding of a really crowded trade, and some investors locked in gains after several years of material outperformance,” says Mark Mahaney of RBC Capital Markets, a longtime internet analyst who has covered multiple tech wrecks. “These kind of market drops usually create buying opportunities.”

Meanwhile, as I write this early Monday, Apple is up $3.11 (1.81%) in pre-market trading.