Apple (NASDAQ:AAPL) has been a weight on the market since topping out above $700 in late September, and has a lot to prove on a macro level. The sell-off continued following its most recent earnings report, which confirmed concerns about growth and margins in the company’s most important business segments. Late last week into early this week we saw a tradable move in the stock, but the bounce was short-lived. Now, the tech giant is a few points above the intermediate support of $463ish, which it will need to hold above, in my opinion, in order to show any commitment to last week’s bounce.
It feels like AAPL needs a major catalyst in order to get traders excited again. That catalyst could come in nearly two weeks, on February 27th, at Apple’s annual shareholders meeting in Cupertino, CA. AAPL shareholders have always been happy campers as the price of the stock appreciated tremendously over the year, but now that the stock has lost nearly 40% of its value from highs those shareholders are demanding something be done with the mountain of cash the company is nesting on.
Prominent shareholder and famous hedge fund manager David Einhorn of Greenlight Capital sparked last week’s transitory bounce when he said he would sue AAPL in an attempt to force the company to return some of that cash to shareholders. In the keynote address at Goldman Sachs’ (NYSE:GS) tech conference this week, Apple CEO Tim Cook dismissed the lawsuit as a “silly side show”, which is not what investors wanted to hear. If pressure continues to mount from shareholders, it will be interesting to see if Cook changes his tune and considers a more substantial dividend. Investors will be glad to see, though, that Einhorn, according to his latest 13F filing, increased his Apple shares to 1.3 million, up from 1.09 million in the third quarter.
The other potential catalyst we will be keeping an eye on in the coming months is the potential for another game-changing product from AAPL. The media buzzed this week over the prospective iWatch, with Bloomberg reporting that 100 designers are toiling over a smart watch that can bring many capabilities from the iPad, iPod, and Siri to your wrist. Piper Jaffray analyst Gene Munster also told reporters today that Apple could hold a media event in March or April, either to unveil a souped-up iPad or an “Apple TV” set.
In the end, Apple is lethargic and shouldn’t be overtraded until it comes back into play. Take the emotions out of the Apple trade, because if the stock can’t hold its intermediate support of $463, Tim Cook’s Apple could fall very far from the Steve Jobs tree.
By Scott Redler
Disclosure: Scott Redler is long MSFT, BAC, GE. Short SPY