How low will Apple shares go in a major market correction?

“Clearly, Apple is a great company and it should continue to outperform the broader indices in the years to come,” Parsimony Investment Research writes for Seeking Alpha. “However, the price action has been almost parabolic over the past six months and investors should be cautious about adding to their position at current levels. Its important to note that our caution is driven by our technical fear that a broader market correction is imminent and not necessarily the current valuation of Apple stock.”

“All else being equal, Apple is probably a ‘buy’ at current levels based purely on fundamentals,” Parsimony writes. “But we all know that fundamentals sometimes take a back seat during a broader market correction. That said, we believe that there will be a downside floor on price based on valuation and dividend yield.”

Parsimony writes, “From a technical perspective, we think that the broader markets could correct 25%-30% by the end of the year. However, we think that Apple will hold up relatively better than the indices. Assuming Apple’s 80% relative correction rate compared to the broader markets from the last two corrections, we think there could be 20%-24% of downside risk for Apple shares (from the most recent high of $644.00). This equates to a downside price range of $490-$515 for the stock.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Carl H.” for the heads up.]

19 Comments

  1. Why don’t any of these analysts go after Priceline or Amazon for major corrections? Why is it always Apple? Why does a company that’s accumulating $12 billion in cash every quarter constantly need a price correction. Apple will likely accumulate more reserve cash in 2012 than Priceline’s entire market cap. What makes Apple share price so much weaker than other stocks? I clearly must not understand anything about the stock market. I hear that Apple is definitely undervalued, so why does it need to keep going lower?

    1. This is a very good question, but if you look at Apple’s stock over the years, you will see that it’s always been like this. It’s probably due to Apple’s minimal presence in Washington combined with other factors (the blue bloods LOVE AAPL for profit-taking). Apple has very few friends. They try to go it alone. The reason we see the major jumps in Apple is because at some point, they got too big to easily toy with. They simply have too much money and power. Apple could stay like it is for a year and then suddenly jump to 700 when the external downward pressure can no longer be maintained.

  2. You pays your money, you takes your choice. I am all ahead 2/3’s and will probably go more with a drop to below 550. The other morning I took a slip of paper and wrote on it 110 billion and then I wrote the number down. $110,000,000,000. I do not know if I wrote the number down correctly……?…?….? But it is a lot of zeros. How does one argue with that asset? No debt. Damn near every product made is sold already. People love the company and the company functions beautifully. Forethought and paradigm shifting is a way of life. The prime reason for all of the negative thought and verbiage is that most people would not recognize brilliance because they have been baffled by BS so long. I cannot think of another company that has all of these positives going for it. If people concur with their base fears, “To hell with them.” I shall buy as much of Apple as I can, and at the price I want. The psychology of irrational fear prevails, I may be a liberal, but I am a capitalist first.

    1. 110 followed by nine zeros…yep, you got it right, Uncle Rat. You normally only mess with numbers like that when you are counting stars in the galaxy. In fact, it each dollar in Apple’s wallet could cover a star in our Milky Way galaxy, fully one-quarter of them would be darkened.

      It is very strange to be able to think that a market cap of $1T or more is now a distinct near term possibility for Apple, unthinkable as that was just a few years ago. I don’t know where Apple will go – if I said that I did, then I would be lying like the rest of the prognosticators. However, the only question that an investor needs to ask is, “Do I believe that my money would be better off invested elsewhere?” If the answer is “yes,” then by all means consider your options.

      Around 20% of Apple’s market capitalization is available in the form of cash and securities. The other 80% covers everything else, including an insane growth rate and profits that put Apple at a close third in the U.S. last year. Truly amazing…I hope the ride continues for a long time.

  3. Stocks, even the best stocks, go through corrections, as does the market. For AAPL to correct into the $490 range is simply the market being the market. Many of the readers on this site seem so gung-ho about Apple and AAPL that they forget the dynamics of stock behavior. Yes, there’s some manipulation, but that’s true of many stocks; in the long run, fundamentals rule and AAPL will continue its ascent.

    To expect a stock to move up roughly 50% in a few months–that 50% representing a two-hundred or so point move–and not correct at some point is naive. Consolidations are a normal, healthy part of a stock’s behavior. It ultimately creates stronger stockholders, a stable base from which to launch the next leg up, and support should the stock fall again sometime in the future.

    So relax, everyone.

    1. There is NO correction of AAPL’s stock value occurring.

      An actual correction of AAPL’s stock value would be somewhere over $700 per share. IOW, as I pointed out last month, the correction of AAPL’s value last month was driving the rise of the rest of the stock market. You can watch it every day on the earnings curve. THAT was unrealistic because AAPL is NOT the market. AAPL is BEYOND the market, obviously. That freaks people out as it is an extreme rarity.

      So rather than let AAPL rise to a realistic, corrected value, all the DayTraderTards still think Apple IS the market and sell sell sell accordingly. This is what is called MORON behavior.

      Apple’s value continues to rise. (I’m talking ascending annual profits here folks! That’s not confusing!) Of course there will be an AAPL price correction UPWARD. Enormous DUH Factor.

      Sorry, rest of the stock market! You get corrected DOWNWARD as you deserve. Apple’s coattails are out of your grasp.

        1. I believe I covered it nicely. AAPL has never reached its worthy price. IOW AAPL’s price has been consistently depressed thanks to our ongoing worldwide economic depression. An actual AAPL correction would only be upward. There is no reason for a ‘correction’ to only be downward.

  4. Just more fear manipulation by clue free people that think they are masters of the universe -THEY’RE NOT. IF you want the REAL SCOOP, plant your lazy as* down in front of a high-frequency trading system, figure out how to use it, and then PLEASE CALL THE PARSIMONY folks and tell them they are clueless as well!

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