Apple Inc. (AAPL) is a company that makes mobile communication and media devices along with personal computers and portable digital music players. The stock is currently trading at $406.29 per share with the stocks 52-week range between $385.1-$705.07. On the year the stock is down 24.32% and over a 12-month period is down 31.04%.
It looks as though Apple could have bottomed out after dipping below $400, but with the possibility for an array of new products coming in the future, it could give the company a much-needed boost.
UPGRADED TO A BUY
Apple stock, which has fallen 25.5% in the first half of the year, has been upgraded to a buy from marketwatch.com. The company is looking to bounce back with help from its solid financials and current valuation. In recent news Apple has applied for a trademark with a concept labeled as the “iWatch.” This is the sign of a completely new type of product that Apple looks to delve into, meaning the potential for a huge upside with the concept of the wearable computer.
IT’S A RISK
It does have a possibility of not succeeding as many people are convinced that wearing a device does not have much of an appeal. As Apple looks to reach new markets there is also a chance that they will be releasing an entry-level iPhone. This model would be cheaper than previous products and would likely come in an array of colors. Although this rumor has not been confirmed, it could mean the company might be able to reach a new consumer and generate revenue from an untapped market. In a recent study by marketwatch.com, it has given the title to the iPhone as the most profitable product in America.
THE NUMBERS
From the company’s $156.5 billion in sales during the 2012 year, around $80.5 billion came from the iPhone. It has been calculated that the iPhone’s profit margin is at 40%, which is about 5% higher than the entire company’s profit margin. As the iPhone continues to be a successful product for Apple we are expecting to see the new iOS7 software out in September.
As this is the first major redesign for the software since 2007, we could see an array of users being intrigued by the new product, which could help spark a renewed interest for the company from the existing consumer. In other news, due to the demand of products expected to be cyclically low, Apple has been offering promotional sales within the past few weeks.
They have offered the iPhone with discounts anywhere from $50 to $100 and further discounts if an older iPhone model was traded in at the time of purchase. This could help provide Apple with a higher number of sales than were previously expected at the end of the second quarter. Even though we have seen Apple stock struggling this year, it is possible that with an array of new products coming, we can see the company make a strong comeback.
TRADING TARGETS
If I looked at Jan 410 ATM straddle which is priced at $67 it would give me two measured move targets:
Upside: $410 + $67= $477
Downside: $410 – $67= $343
POSSIBLE TRADE SET-UP:
Buying the AAPL Jan 430-480-530 Call Butterfly for $7.25 debit
Risk: $725 per 1 lot
Reward: $4250 per 1 lot
Breakeven: $437.25 and $522.75
6-1 Reward to Risk Set-Up
GREEKS OF THIS TRADE:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
