Image via CrunchBase
Starting in January, Apple started heading for the Moon. In a mere three months, its share price moved from $400 to a recent high of over $600. Given the move, the question is: is Apple due for a breather?
Compared to its earnings, Apple's shares do not seem over-valued. Based on its most recent 10-Q filing, the company is trading at a price-to-earning ratio that is in line with the broader market. Considering its earning growth rate, some might consider the stock cheap.
However, based on the same 10-Q filing, shares are trading at about 3.3 times revenues. This is noticeably higher than the broader market. Considering the firm’s revenue growth rate, perhaps the higher valuation is justified.
Turning from the fundamentals and to the stock’s price action, a pattern seems to be forming. It’s called a head-and-shoulders pattern. Such a pattern occurs at the end of a good run and at the beginning of a corrective phase. If this is the case for Apple, we should expect an upward bump sometime in the next two weeks. The upward bump would stop short of the recent $621 all-time high. Then, shares would make a move below $575. We'll see.
As a matter of disclosure, our clients have long positions in Apple but no short positions.
