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Morningstar Senior Equity Analyst Brian Colello on the factors causing Apple stock’s decline.
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Apple shares rising after approaching the infamous death cross what is that the death cross is where the fifty day moving average drops below the 200 day after.
But today's stock gains that we're not so dramatic compared to the recent selloff that are next guest says could partly be attributed to profit taking -- -- and increase.
In the capital gains tax Morningstar senior equity analyst Brian -- Joins us now so Brian we've been talking a lot about how companies are changing their patterns in their behavior in dividends and all sorts of things as a result.
Of the increase taxes that are coming how much of Apple's decline.
Is because people want to walk in their gains at the pre tax rate the cheaper tax rate that's gonna go up in 2013.
What we think that is the single biggest factor that drove all the selling if you look at the September high of 705.
That the 74%.
Year to date increase so I think natural profit taking -- price part of the selling in October November.
Then with the reelection you had increased fears about fiscal cliff increased fears -- capital gains taxes that added another layer selling.
And after that happened I think you have a bad looking chart and maybe some of the technical factors come in even if you saw bounced back from I think 505 up about 590 over the past couple weeks.
That's profit taking against I think there's a good chance that some people -- even -- short term gains over the past month.
And really you know try to take advantage of that the better tax rates.
Exactly you can't you can't deny that there's a great opportunity to at least take some profits off the table but let's look at the fundamentals of the companies.
If you looked on every kid in America's wish list for Christmas or product there's apple product on their somewhere and -- let's just call it what it is it is a popular popular yet for anybody.
No matter what so the question becomes.
Is it just a trade where people believe now that the 'cause apple.
Is is now facing competition.
OK from the the android tablets in the Kindle fire which is undeniably hot as well that may be people are starting to let it -- to their brain that apple might not always be the number one point.
Well -- certainly chance of that I think Google and Amazon there's certainly gonna capture the more price sensitive customers.
I think an important thing to consider in Smartphones and even in tablets is that apple doesn't need a 100% of the market.
If you -- about the Smartphone it business in total.
Over the next few years most of the growth is going to come from emerging markets it's going to be lower priced handsets and it'll probably be entering.
But as long as apple can maintain its share of the premium Smartphone market stay at the high end we think they'll be just fine.
Brian let -- let's bring it back to where we started in the and that tax issue and how much that's affecting the trades now.
Will those people who wanted to walk in their profits now and are selling will -- buy back in at this lower rate after the first of the year.
I certainly think that's the case and it's certainly possible if they reporting good quarter in in the beginning of January so I think that to be the catalyst.
To get investors -- -- -- let me let me just press you -- before you -- what do you think the price will be when that happens when it gets back to.
To the new normal what will be in 2013.
Well we think it's a buying opportunity in the mid five -- and so if if the stock kinda stays in the range it's in.
We do think it's an opportunity to add to it after value target is 770.
So I think there's certainly room for upside.
In in and in India in short -- I would think so acceptance have a -- probably watching it save it -- that level thank you so much to you Brian thanks thank you are.
