The time to buy Apple is after the next plunge

It's oversold but could still fall further as rivals report slowing smartphone sales.

By Forbes Digital Jul 8, 2013 4:40PM

Since Friday, there have been three new ominous data points for Apple (AAPL), which is scheduled to report earnings on July 23 after the market close. 

First Samsung reported lower than expected earnings estimates. Galaxy S4 from Samsung is the main rival of iPhone 5. Lower-than-expected earnings from Samsung are due to slowing sales of Galaxy S4. (For a more detailed analysis, see Forbes.)

Taiwan's HTC, another big player in the high end smartphone market, also reported lower-than-expected earnings. HTC reported operating income of NT$1.05 billion on revenues of NT$70.70 billion. In Taipei, HTC stock fell about 5% to the lowest level since 2005.

HTC has not been able to compete with Samsung and Apple on large advertising budgets but its flagship HTC ONE is one of the best phones in terms of specifications and performance on the market. In my analysis after a careful study of HTC earnings, this earnings miss is mostly due to saturation in the high end smartphone market.

Investors disregarded negative data points from Samsung and HTC and ran up Apple stock to $422.47 this morning in the pre-market. Then investors were hit with fresh evidence for a bearish view. A report by Wedge Partners said that Apple has cut its iPhone production forecast by 20% for the second half of 2013 to 90 to 100 million phones. Apple stock promptly fell to $410.62.

Apple stock is oversold but it appears that the three new negative data points are still not fully discounted in Apple stock price. If Apple were to report earnings close to the low end of estimates and there were no new product announcements combined with projections on the low end, the stock has further to fall. If such a fall were to occur, in my analysis it will be a buying opportunity as the fall will mostly complete a transition of Apple stock ownership from growth investors to value investors.

These data points have significant negative implications for the stocks of Qualcomm (QCOM), Broadcom (BRCM) and ARM Holdings (ARMH).

More from Forbes/Nigam Arora
5Comments
Jul 8, 2013 8:56PM
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I remember when Crocs Inc., the company that makes Crocs, was trading at over $75 a share. I read in some article that people should snap up the stock after the next "plunge." Well, anyone who bought shares (that fell down to 79 cents) in a company that arguably makes the ugliest "shoes" in the world deserve to have their money taken away from them.
Jul 8, 2013 8:17PM
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Nice try but what if competing products continue to take Apple's market share in spite of Apple "new" products and Apple's margins continue to fall as smart phones and tablets become PC commodities.

Jul 8, 2013 10:05PM
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Without Steve Jobs I don't have much faith in Apple anymore.

 

Jul 8, 2013 9:56PM
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Actually CROCS are very comfortable or millions of people would not have bought them but they where also a fad that peaked like any fad and sank back to reality.

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