Big cap tech has been sloppy of late, and I have instead chosen to focus on other, more calculated set-ups out there. But today I am ready to once again revisit my old friend Apple Inc. (AAPL). Since Steve Jobs announced his third medical leave of absence, AAPL has been like a live power-line thrashing about in the street after a major storm. I have stayed far away while it has whipped around. Composure has changed nearly every day.
Immediately following the announcement the stock gapped down around 5% as investors feared the end of Apple’s dominance as we know it. The next day, however, investors aggressively scooped AAPL shares lower and the gap was almost completely filled. The earnings report was a home-run, and the stock opened at highs once again. But the bears weren’t going to go down without a fight. Over the next few days AAPL was hammered back down to reactionary lows.
But now, the stock is breaking back above a recent pivot around $345 with one eye on highs (~$349) once again. The company has several new revenue sources coming this year with the Verizon iPhone, set to go on sale in a week, and the iPad 2. The company continues to innovate, and the brand remains powerful even without Steve Jobs running day to day operations.
From a fundamental perspective, Apple still continues to be very moderately valued with a trailing P/E of 19, forward P/E of 13 and PEG ratio of 0.71. Companies that are considered ‘fairly valued’ should have a PEG ratio of 1. The average analyst recommendation (on a scale of 1-Strong Buy to 5-Strong Sell) is 1.6. The median analyst price target is $425, with a high of $550.
As for technical entries on the trade, you can look to enter on a break above the recent pivot just below $346 for a move back to all-time highs and beyond. Stops should be placed at the bottom of the pivot around $338.
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*DISCLOSURE: Long AAPL
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