Apple Stock's Troubles Could Be Far from Over

Apple has historically been one of the worst performing S&P 500 Index (SPX) stocks in September

Sep 22, 2017 at 12:57 PM
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It's been a rough week for Apple Inc. (NASDAQ:AAPL). With today's 1.6% drop to trade at $150.94, the shares are pacing for a nearly 6% weekly decline -- their worst weekly loss since April 2016 -- amid pressure from negative Apple Watch reviews. And while iPhone 8 and iPhone 8 Plus go on sale today -- an event that could spark a "rocky day" for Apple due to lackluster sales, according to Loup Ventures' Gene Munster -- the shares have shed roughly $50 billion in market cap since the company's Sept. 11 product launch.

However, Apple has historically been one of the worst stocks to own in September, and this year appears to be no different. While the stock has averaged a monthly loss of 4.2% over the past 36 Septembers, according to data from Schaeffer's Quantitative Analyst Chris Prybal, it is currently down 8% month-to-date. What's more, AAPL stock is on track to close south of its 120-day moving average for the first time since Nov. 14.

This selling pressure seems far from exhausted when looking at Apple's sentiment backdrop, too. Short sellers, for instance, have been blasting the stock -- with short interest up 23% in the most recent reporting period to 48.11 million shares. This accounts for a slim 0.9% of Apple's available float. A continued rise in short interest could create bigger headwinds for the stock.

Plus, there's plenty of room for analysts to downwardly revise their ratings on Apple shares. Of the 32 analysts covering AAPL, 25 maintain a "buy" or "strong buy" rating. Plus, Piper Jaffray this morning boosted its price target to $196 from $190 -- nearly 30% above the stock's current trading price, and well above Apple's record high of $164.94 from Sept. 1. 

Those wanting to bet on a bigger decline for Apple stock might want to consider doing so with put options. Not only does buying options allow you to risk less capital, but AAPL has consistently rewarded premium buyers over the past year, per its Schaeffer's Volatility Scorecard (SVS) of 91. In other words, the equity has tended to make outsized moves, relative to what the options market has priced in.

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