Apple Inc. (AAPL) Traders Celebrate Apparent End of Correction


Apple Inc. investors are seemingly happier than before earnings arrived as the correction in the firm’s shares seems to be over now. The stock is down just 8.5% form the all-time high hit in April, but traders seem calmed by the path Tim Cook is taking through the rest of 2015.


Correction over now

In July, Apple stock lost 10% as investors feared a slowdown in Chinese demand. Later, shares dropped over 20%, their worst, during the summer. This phase is over now following the most recent results that came in better than estimates. Year to date, the stock is now up 11.5% versus 2.5% gain for the S&P 500.

With the last earnings report on Oct. 27, Apple put to rest the concerns of many investors. Since Oct. 27, the stock has gained over 7% beating the 2.2% gain by the S&P 500. Apple Inc. shares are also now back over their 200-day moving average, which is a bullish sign for technical investors.

Analysts are bullish on the stock. On average, they expect the stock to hit $149.42 a share, which is over 20% upside from the current stock price. For the current quarter, Wall Street expects the firm to post earnings of $3.26 a share, up 6.5% from the same quarter last year.

What makes Apple a success?

Apple has a very profitable business, and it enjoys a massive brand power with a robust reputation for quality. This helps the firm to charge premium price for its products. On top of that, management keeps  operations lean and efficient, helping the business to stay above the rivals, says a report from Motley Fool.

Apple accounts for 92% of all the operating profits in the smartphone industry while rival Samsung comes is second with 15% of the profits, according to Canaccord Genuity. For the year ended September, Apple reported $81.3bn in operating cash flow or 35% of the revenue, up 36% yoy. In comparison, the Korean firm had only $14bn operating cash flow in the first half of 2015, a drop of 25% from last year.

Though the correction seems to be over, it does not mean the stock can’t go of-track again. Mizuho analyst, Abhey Lamba believe that the slowing smartphone growth could make it harder for the stock to outperform. Lamba has a Hold rating on the stock with a 12-month price target of $125, not much upside from the current levels.

On Tuesday, Apple Inc. shares closed up 1.15% at $122.57. In the last one-month, the stock is up over 11%.

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    Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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