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Financial Adviser Peck: Apple Stock Is in Correction, not Long-Term Plunge

Wednesday, 06 Feb 2013 09:20 AM

By Dan Weil and John Bachman

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Image: Financial Adviser Peck: Apple Stock Is in Correction, not Long-Term Plunge
Apple shares, which have dropped 35 percent from their record high price last September, are in the midst of a correction rather than a long-term downtrend, says R.C. Peck, CEO of Fearless Wealth, a financial advisory service.

“Their profit margins are never going to be as high as they were last year,” Peck tells Newsmax TV in an exclusive interview. The operating profit margin for 2012 was 35 percent.

Competitors “are finally starting to wake up, after five or 10 years that maybe we should make stuff that people want,” Peck says. “But I think from a price chart, this is a correction. This is nothing more than the stock pulling back to its 10-year trend-line.”

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A declining stock price sparks fear, which begets more selling. “It’s just human nature,” he notes.

Peck sees $425 as the bottom price for Apple's stock price, which represents a 7 percent decline from Apple's closing price Thursday of $455.31.

Editor's Note: Make 2013 the Year You Pay Zero Taxes

The $425 price level is where Apple stock broke out when it marched up to a record high price of $705. So what was once resistance now becomes support for Apple shares, he explains.

In addition Apple stock’s 10-year trend-line stands at about $425.

“I’m thinking $425 is an area where you want to add Apple to your short list” of stocks to buy.

Investors who have mutual funds holding Apple don’t have to worry much about its decline, because the rest of the stock market has gained while Apple's stock price has dropped, Peck notes.

As for other technology stocks, he says he wouldn’t buy Facebook, despite its report Wednesday of a 40 percent increase in revenue for the fourth quarter.

“It’s pretty expensive,” Peck says of the stock, which is trading at 39 times forward earnings. “Yeah, their revenue went up but, for me, it’s unproven,” he says.

“There’s just no reason to take that type of risk on a brand new company. I’d rather buy a company that has a price chart that’s been around 10 or 15 or 20 years that’s proven,” Peck notes, adding that he likes Intel as a value play.

When it comes to Netflix, whose stock has more than tripled in the last four months, “they’ve got it figured out,” Peck says. That rise followed a plunge that began in mid-2011.

“They really messed up last year with how they wanted to split the company,” he states. “Clearly people were upset by that, and there was a whole bunch of bad PR.” But now things are back in gear.

“Netflix probably moved down way too hard, and people weren’t expecting any good news, and when it came out, things skyrocketed up as they should have,” Peck says. The firm reported strong fourth-quarter results

Like Apple, Netflix had been priced for perfection, he believes. “We just love these things, and there’s going to be a time where things underperform,” Peck explains. “It’s not going away. This is more emotion and volatility than anything else.”

Editor's Note: Make 2013 the Year You Pay Zero Taxes

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