Today shares of Apple Inc. (NASDAQ:AAPL) have continued their downward trend, dropping as low as $530 per share in late morning and early afternoon trades. So what’s ahead for the stock? There’s plenty of speculation, and Forbes’ Peter Cohan adds his own advice in for investors: watch what the hedge funds do.
Apple Inc. (NASDAQ:AAPL) shares continue their downward trend today, dropping as low as $530 per share at one point. And to think that shares of Apple were worth $175 more per share just a few months ago. So what’s next for this embattled stock? No one knows, but plenty of people will speculate about it.
Forbes’ Peter Cohan questions whether shares of Apple Inc. (NASDAQ:AAPL) are worth a mere $420 each, or as much as $1,160 apiece. The stock has lost 24 percent of its value since the $705 high in September, but on the other hand, it has reported a 57 percent growth in earnings per share over the last five years. Many insiders expect the company to increase its earnings by approximately 21 percent in the next five years as well.
So, how do we account for such wide views on what Apple Inc. (NASDAQ:AAPL) stock is really worth? Cohan explains that on the low end, we have analysts using technical analysis to estimate what a stock will be worth according to the trading volume of that stock. So if it’s falling on “heavier than normal volume,” it will keep falling until it evens out, and the same holds true if it’s rising on “higher than normal volume.”
On the other hand, we have a more theoretical formula that results in the high end number. Analysts simply guess what the stock’s price per earnings ratio will be and multiply it by their estimated price per share.
Instead of listening to what all the analysts say, Cohan said it’s better to see what the hedge funds are doing, and although Apple Inc. (NASDAQ:AAPL) was the most widely held stock in the second quarter, in the past three months we’ve seen numerous hedge funds getting rid of their shares of Apple.