Apple Down 35% from Peak, Analysts Still Exuberant

Just as major stock indexes are making a bullish move above key levels, Apple (NASDAQGS:AAPL) has crumbled.

After hitting its $705 peak in the fall of 2012, Apple has since fallen 35% to the $450 range. And what do Wall Street's analysts have to say for themselves? Before we answer that question, here's what they said about Apple:

"Wall Street Analysts Increasingly Bullish as Apple Hits Fresh Highs." - Wall Street Journal on 8/27/12"Apple seen as 'trillion dollar baby'" - MarketWatch on 8/21/12"Apple could be worth a trillion in one year" - The Atlantic Wire on 9/23/12"Apple: $1,111 per share and a $1 trillion market cap next year." - All Things D on 4/26/12"Apple $1,000 Not Half-Baked" - Jim Cramer at 4/3/12

Question: Has Apple's 35% bear market decline quelled enthusiasm for the stock on Wall Street? 

Apparently, not because Factset just wrote: 

"Although analysts reduced their fourth quarter EPS estimates for Apple, they did not make significant changes to their ratings over this time frame. In terms of target prices, analysts did lower their estimates in aggregate by about 8%. The mean target price for Apple is $729.84 today, compared to the mean target price of $792.40 back on September 30. "

In other words, Wall Street is just as giddy about Apple today as it was at $700!

Apple is still the #1 ranked stock within the S&P 500 with the highest number of buy ratings. Oddly, it's also #1 in terms of the largest percentage of upside difference between analysts' mean target price and its closing price.

Here's the problem: Investors who got caught up in the emotion and bought at the peak, are getting creamed.

Apple is a major component of technology ETFs like the PowerShares QQQ (NASDAQGM:QQQ) and S&P Technology Sector (NYSEARCA:XLK). So far this year, technology stocks have lagged the broader market (NYSEARCA:VTI) but are still posting a 3% YTD gain.

When Apple shares were trading around $650, we re-analyzed the frenzy and gave readers specific support levels, that if broken, would spell trouble for the stock. 

In a research piece titled "Is Apple's Stock in a Bubble" written on Oct.5, 2012 here's what we said:

"There are many examples throughout history of parabolic moves up in price that then come crashing back down much faster than the initial advance.  The Dutch Tulip Mania in the 1600s, the Mississippi land bubble of the 1700s, Gold (NYSEARCA:GLD) and Silver (NYSEARCA:SLV) in 1980, Japan late 80's(NYSEARCA:EWJ), and countless examples of individual stock and commodities through the years that had astronomical price rises only to come crashing back down eventually.  Apple is in a decade long uptrend but if price were to fall below $600 that would be a sign that the 4 year uptrend in Apple has changed to negative."  

The ETF Profit Strategy Newsletter uses relative strength analysis along with common sense technical analysis to provide a short, mid, and long-term forecast along with actionable buy/sell recommendations. This is how we identify key trend changes in the sectors as well as the broader markets.