Apple shareholders could be in for some rough times ahead, according to a series of technical analysts.
Even though it is widely viewed to be undervalued after hitting an 11-month low this week and nine out of 10 brokerages recommend that investors buy Apple, technical strategists have described the stock as "broken".
They note that trading charts show few price points where investors can expect clusters of buying to support Apple's shares. For example, the stock's medium-term momentum, based on its 50-day rate of acceleration, has been on a downward slope since March, but has not hit over-sold levels.
Apple could very well still underperform.
Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, said it is hard to find an entry point at current levels, calling the stock "broken."
"There's been a lot of technical damage, but at the same time it still looks like it's in a downtrend," Detrick said. "This could still be a name you want to avoid and could very well still underperform in our opinion."
Apple has a chance to turn things around when it reports results for the December quarter on January 23. Investors are unusually nervous because of reports that Apple might be curtailing purchases of screens for its iPhone and iPad, which together account for over 70 per cent of revenue.
If Apple can substantially beat Wall Street's subdued expectations, that would go a long way towards restoring confidence in the near term.
It is not enough for Apple to just meet targets - that could cause shares to fall further in the short term, some analysts say. Apple has only missed analysts' profit forecasts four times in the last 10 years, two of those in the most recent reporting periods.
"If you have a 10 per cent to 15 per cent beat on estimates, it will be enough to have people say, 'Oh my gosh, Apple has its game back,'" said Chris Bertelsen, chief investment officer of Global Financial Private Capital, a Sarasota-based wealth manager with $1.7 billion assets under management.
The fund had cut back its holdings in Apple to less than 1 per cent of its portfolio from about 5 to 6 per cent last fall, but Bertelsen said it is now adding again. He likes Apple's longer-term prospects as the global smartphone market grows, particularly in developing countries such as India and Brazil.
Analysts on average estimate Apple's fiscal first-quarter earnings per share at $13.41, down slightly from $13.87 in the year-earlier quarter. Revenue is seen up 18 per cent at $54.7 billion, according to Thomson Reuters I/B/E/S.
The December quarter is typically the strongest one of the year for consumer electronics sales and Apple had a new product, the iPad mini, in its holiday season line-up.
Wall Street estimates Apple sold between 47.5 million and 53 million iPhones, up considerably from the 26.9 million sold in the previous quarter, when the iPhone 5 had not made it to all markets. IPad sales are expected at 23 million to 25 million.
