TheStreet.com chart gazer: Apple’s best days are past

“Apple stock has fallen over 77 points since the December high. True believers look at this pullback as a small bump in the rally road, while company detractors believe that recent cracks in the growth story could escalate into a full-scale collapse we head through 2008,” Allan Farley writes for TheStreet.com.

“As a technician and trader, I have little insight about iPod, iPhone or Mac sales going forward,” Farley writes.

MacDailyNews Take: That’s for sure, at least.

Farley continues, “But I can read the charts and see how they’re shaping up after the recent plunge. Is now the right time to reload positions for a trip back to the highs? Or should current investors jump ship while they’ve still have the opportunity to salvage a few profits?”

MacDailyNews Take: Did he say “charts” or “stars?” The latter would have about as much credibility as the former when it comes to forecasting a mould-breaking company like Apple.

“What conclusion can we reach looking at the long-term Apple chart? Well, it isn’t good news for the bulls. The rally off the 2006 low was parabolic in nature. As a rule, parabolas end poorly, as we’ve discovered with the housing market in the last two years. So it’s likely the long uptrend has finally ended. In its place, I’m looking for lower prices, or a sideways period lasting for up to two years,” Farley writes.

“Can long-term, deep-in-the-money Apple longs use this technical viewpoint to their advantage in the months ahead? Of course — there are many things they can do to protect profits and reconsider their goals, given the broadly negative outlook for 2008,” Farley writes.

MacDailyNews Take: “Broadly negative outlook” from a guy who’s gazing at his navel a chart with no other information. Ridiculous.

“First, they can lighten up after the stock bottoms out and retraces a good part of the recent downtrend. Second, they can buy long-term equity anticipation securities (LEAPS) or use shorter-term options to dampen volatility and lock in profits. Finally, and perhaps most important, they can just end their love affair and look for the next tech juggernaut, which is waiting patiently for their discovery,” Farley writes.

Full article here.

Yeah, but what do the entrails say? Forecasting stock performance based on charts alone is folly, especially with a company like Apple. Oh, wait, there are no companies like Apple.

Apple’s latest quarter set records for revenue ($9.6 billion) and net quarterly profit ($1.58 billion). Apple blew away expectations with record Mac shipments (2.319 million), and also achieved record iPhone sales (2.315 million) along with record iPod sales (22.121 million). The Street punished Apple because they fear a recession and because Apple didn’t promise them what they wanted for the upcoming quarter. Apple merely promised Q2 08 revenue of “about $6.8 billion,” which would be 29.3% over Apple’s Q2 07 posted revenue of $5.26 billion. In other words, the ever-conservative Apple expects their business to grow 29.3% year-over-year in Q2 08.

With iTunes Movie rentals, the new Apple TV “Take 2” software update coming, larger capacity iPhone and iPod touch devices, booming Mac sales, the iPhone/iPod touch SDK looming, 3G iPhone, the world’s best OS, and more – Apple continues to fire on all cylinders.

You can’t see all that if all you’re doing is staring at a chart.

51 Comments

  1. Relax folks. This is technical analysis. His analysis is quite sound from a technical point of view. But understand that technical analysis doesn’t take into account anything but stats – directions, numbers, time on the market. Apple has historically proved technical analysts wrong.

  2. My girlfriend just bought a new iMac two weeks ago on top of a shiny new 160GB iPod Classic last month. Plus, I’m planning on getting at least a couple new shuffles and maybe even splurging finally for a 16GB iPhone. Yeah, I think Apple’s best days are in the past ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />

  3. This guy is full of shit. As far as technical analysis goes this asswipe does a pretty piss-poor job of this and has no insight as to what Apple is all about. There may be a downturn, but everyone is headed for a downturn. But that’s the economic climate we are in now. Remember, that drop in price happened during a week when everyone cried “recession” AND Apple’s guidance was lower for next quarter. Everyone freaked over this, thus the huge point drop.

    But to bail now would be foolish, and now may be the best time to invest. Farley should get another job.

  4. Numbers. Knowledge. Power.

    A handful of numbers tells nothing. Like looking out your window, testing the wind, then saying, “The numbers tell me the earth is flat.”

    Gathering a bunch of numbers, you look out your window, look at NASA satellite photos and data, find other earth and geometry information and say, “The earth is round, spinning at a tremendous rate, and rotates the sun in a parabolic orbit.”

    This guy is doing the best he can with ONLY the numbers he knows. A bad start and a worse finish…

  5. The Street has always been down on Apple to some degree– and I’m not saying this to argue whether he’s right or wrong. It’s just that they have a vested interest in pimping web hits. And here in lies a major problem with “news” sites that ultimately feed of swings in news– they want things to be unstable. That’s certainly something to remember when listening to any news organization. Propaganda isn’t just what they tell you is happening, it’s what they leave out of the story. Farley’s choice to highlight certain aspects of his analysis leave out others that may (strongly) contradict his position.

    But that wouldn’t lead to many clicks, now would it?

  6. Why anyone would take the advice of a technical analyst is beyond me. I have read more loopy BS from chartists than I can recall. The great minds analyzing Wall Street have all looked at one thing: fundamentals. It’s EARNINGS and CASH FLOW that allow for a clear understanding of a publicly traded company’s performance, not a bunch of squiggly lines and reading of tea leaves. I will continue to depend on the wise thoughts of Warren Buffet and Peter Lynch to assess Apple and other publicly traded companies, not some whack-job from Cramer’s outfit.

    So long as Apple continues to post solid earnings, and the company’s quarterly reports beat the often insane estimates for the company, I won’t care a whit about what idiots posing as pundits have to say. Peter Lynch was prescient when he said that a company’s stock price eventually and invariably tracks its earnings. The two are always correlated. While the timing of a stock’s price often is ahead of what earnings will do, eventually, they link.

    Personally, I think the decline in Apple’s stock price has more to do with Wall Street both trying to short the stock and take profits as large institutional investors drove the stock’s price down (in a bald-faced attempt to cover for the losses they incurred by causing the real-estate meltdown by absurd, non-existant risk management of mortgage-backed securities) than anything Apple has done. Much of the fear over Apple’s earnings is based on speculation and not fact. While big money can build a stock’s price up or down, eventually, what propels a stock is the company’s underlying performance as represented by earnings.

    No idiot looking for teacup patterns on a stock chart will ever comprehend that. And that is why I choose to ignore their alleged counsel. You should too. Otherwise, you are better off joining the flotsam that are day traders.

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