Is Apple Going To $500?

| October 20, 2010 | 0 Comments

Apple (AAPL) has been on absolute tear recently.  Investors are buying the tech darling stock hand over fist. In the last two months the shares have surged nearly 30% from the August lows.

Now, you may not think a 30% move is a big deal.

After all, a 30% move for a $20 stock can happen quite easily.  But believe me, a 30% move for a $240 stock in just under two months is simply amazing.  Those who got in on the surge are sitting on some hefty profits.

And some investors say the surge in AAPL is far from over…

They’re convinced Apple products are taking over the world.  In fact, one analyst recently put a $500 price target on AAPL.  That’s over 50% higher than current levels!

This brave analyst cited an expanding market for Apple’s hardware, content, and services.  He calculates the total addressable market for their products has grown to over $1.5 trillion.

I would have to agree…

The quality and desirability of their products are setting a high standard in the computer market.  Of course, prices for Apple products are a bit steeper than competitors.  But by looking at AAPL’s record 4th quarter revenues of $20.3 billion, many are willing to pay the price.

I’ll admit, I’m a Mac geek…

I bought an Apple computer a couple of years ago.

After using it, I think the Apple hardware along and the operating system are second to none.  Now I won’t say my Mac experience has been flawless.  But it’s been way better than any other computer I’ve owned.

I love Apple’s top-notch technical support and their easy to use products.  To me it’s well worth the additional cost.  A few extra bucks now means a lot less headaches down the road.

But can shares of AAPL really rise another 50% from here?

Currently AAPL is trading just under the all time high of $319 set two days ago.  This means the only overhead technical resistance is that recent high.

Once this minor overhead resistance is out of the way, AAPL may move to the upside quickly.  As unlikely as it may seem, there’s no technical reason for Apple not to rise to $500.  You see, when a stock has no overhead resistance it tends to rise more freely.

But let’s not get ahead of ourselves…

Right now AAPL is severely overbought.

And the shares fell sharply after reporting earnings on Monday afternoon.  Why would a stock sell off after such a spectacular quarter?

Well, expectations were very high for AAPL ahead of earnings.  The earnings sell-off was a knee jerk reaction due to weaker than expected margins and i-Pad sales.  After rising 30% in a matter of months, investors were quick to book profits.

But the sell off may only be temporary…

Buyers stepped back in to pick up shares on the cheap Tuesday morning.  And with nice support levels at $300 and $295, AAPL may be setting new highs in short order.

The bottom line is this…

As amazing as it may sound, I won’t argue the analyst with the $500 price target.  As expensive as AAPL shares are, it still has plenty of upside potential.  And right now the shares have a lot of upward momentum…

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Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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