Has the Apple Inc. (AAPL) Hype Gone Too Far?

Citi Research waxed optimistic on Apple Inc. (AAPL), which separately announced the launch of its AirPod headphones

Dec 13, 2016 at 10:36 AM
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Amid the launch of Apple Inc.'s (NASDAQ:AAPL) AirPod headphones and a raft of new iOS emojis, Citi Research waxed optimistic on the Dow stock. Specifically, the brokerage firm offered five reason AAPL will soar in 2017, including its "attractive valuation" and the "iPhone 8 Super Upgrade Cycle." While it's not yet 2017, the shares are up 1.6% at $115.07.

That said, things haven't been especially pretty for AAPL. On a year-to-date basis, the stock has underperformed the Dow by about 5 percentage points. Not to mention, the shares are well below their 2015 highs in the $130 neighborhood.

Yet, hopes are fairly lofty on Wall Street. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly twice as many calls as puts during the past 10 weeks. The resultant call/put volume ratio of 1.93 ranks in the bullishly skewed 84th annual percentile.

Beyond that, 28 of 34 analysts rate Apple stock a "buy" or better, and its consensus 12-month price target of $131.84 floats in waters not charted since July 2015. Plus, a slim 1.1% of the equity's total float is sold short. From a contrarian perspective, this collective optimism -- against a less-than-stellar technical backdrop -- could spell trouble for AAPL. 

Regardless, those looking to place short-term options bets on the stock could score a bargain at the moment. Apple Inc.'s (NASDAQ:AAPL) Schaeffer's Volatility Index (SVI) of 18% sits below 93% of readings from the past year, suggesting low volatility expectations are being priced in. Not to mention, the stock's Schaeffer's Volatility Scorecard (SVS) of 99 indicates the underlying has tended to make bigger-than-expected swings in the prior year, relative to what the options market has priced in.

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