Apple Inc. (NASDAQ:AAPL)’s Worldwide Developers Conference has a reputation of shocking everyone with revolutionary new products. At this year’s annual event, the company unveiled a new iPhone OS, fresh features for the Apple TV and a rebooted Apple Music.
But Wall Street barely took notice of those announcements. No wonder, shares didn’t budge on Tuesday.
Is Apple Inc. Past its Prime?
“There is this kind of oxymoronic analysis of AAPL. There were hundreds of articles devoted to WWDC…After I read them, I said ‘yeah…but the market won’t like it,’” Cramer added.
“This disconnect between all the great things that (CEO) Tim Cook is up to versus how we are yawning is funny.”
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iPhone 7 Could Lead the Bounce Back
Apple shares are down 10 percent year to date, and currently trade at about 12 times fiscal 2016 earnings. That’s much below the 18x that the S&P 500 Index commands. Most analysts attribute this cheap valuation to the ongoing narrative that Apple will find it difficult to come up with a new product that can compensate for the decelerating iPhone sales.
However, Morgan Stanley’s Jasmine Lu believes that smart phones sales are likely to rebound during the second half of the year. “Apple iPhone 7 is expected to have the biggest refresh cycle in 2H16, with almost double the value content,” Lu wrote to clients yesterday.
Investors are Scared
Apple Inc. is struggling not just from a fundamental stand point. Even technically, fear among investors is discernible. That would explain why despite coming so close to an upside breakout last week, bulls retreated at the very last moment.
According to the tenets of the century-old Dow Theory, Apple Inc. stock had the golden opportunity to end the intermediate term downtrend by closing above the key resistance around $100. Shares looked all set to do that last Thursday. But a late wave of selling pressure saw bears take control. Since then, Apple is down close to 3 percent.
The opening day of the week long WWDC coincided with a break below Apple’s 20 day moving average. This comes almost a week after shares tumbled below 50 DMA. $90 is the next strong support zone. If the broader markets don’t surprise to the upside, the stock is most likely headed that way.