iPhone Concerns Earn Apple Stock Another Downgrade

Options traders have been mostly bullish, though

Managing Editor
Jan 22, 2018 at 9:58 AM
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Despite a stellar year on the charts, tech titan Apple Inc (NASDAQ:AAPL) is trading 0.7% lower at $177.49 today, after the FAANG stock received its second downgrade in as many weeks. This time, the bearish note came from Atlantic Equities, which cut its AAPL rating to "neutral" from "overweight, " citing softening iPhone demand. The brokerage firm also reduced its current-quarter revenue estimate.

This echoes a similar Apple downgrade at Longbow Research last week, with the brokerage firm also slashing its 2018 iPhone unit shipment forecast. And while the stock started that day trading in negative territory, it rebounded amid broad-market tailwinds, and touched a fresh record high of $180.10 on Jan. 18.

Plus, Apple stock is still up almost 48% over the past 12 months, even with today's drop, so it's no surprise to see analyst sentiment overwhelmingly bullish. More specifically, 20 out of 29 brokerages following the stock carry a "buy" or "strong buy" recommendation.

In the options pits, traders have been upbeat toward AAPL, too. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the stock's 10-day call/put volume ratio at 2.31 ranks in the 71st percentile of its annual range. This suggests that calls have been bought over puts at a faster-than-usual clip during the past two weeks.

However, puts are currently pricing in lower volatility expectations versus calls, per Apple's 30-day implied volatility skew of 2.8% -- in the 12th annual percentile. Nevertheless, premium on AAPL options is relatively rich at the moment, regardless of whether it's calls or puts, with its 30-day at-the-money implied volatility of 25.5% perched above 95% of all comparable readings taken in the past year.

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