Apple's Post-Split Dilemma

 | Jun 09, 2014 | 1:42 PM EDT  | Comments
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Apple (AAPL) is almost touching $94 today. In case you panicked reading that, today is the first day of trading after a 7:1 stock split. Therefore, the stock is now at a 52-week high and closing in on $100 per share. This would take it back to its all-time high from September 2012. At the moment, it's only about 6% below that, up 1.5% in afternoon trading.

Since its April earnings announcement, Apple's stock has increased 25% -- an enormous run for a stock that seemed like it was stuck in the mud forever. Is the move too far, too fast?

I don't think so. We are closing in on the imminent announcement of the iPhone 6, as well as the long-rumored iWatch later this year. There's also the possibility that Apple will have more goodies up its sleeve since software chief Eddy Cue is saying that this is the greatest product pipeline he's seen in his 25 year career at the company.

However, I expect some bumps, or at least some slow periods of no growth, for the stock after such a big move in the last two months. Once we get the iPhone 6 announcement -- or just the announcement of the invitation for the event, not the event itself -- I expect the stock to give back some of its gains. There has been too much bubbliness into the expectation of this announcement for that not to happen.

I also expect most investors will take a wait-and-see approach after they hear details about the new iPhone and iWatch. That means we will likely have to wait a full quarter after they start selling before people are willing to acknowledge that the products are hits or simply OK contributions to Apple's bottom line.

I fully expect Apple to have a juggernaut on its hands with the iPhone 6. The larger screen is going to spawn the mother of all upgrade cycles for the device. There are several industry surveys saying that many more people are planning to upgrade than recent versions of the iPhone.

With iWatch, the expectations are low. So, unless it's a bonanza of a winner (which I don't think is likely at first), I don't expect it to move the stock much. On the other hand, I believe the bears are probably going to be surprised just how many people see it as another must-have device.

The bottom line is that Apple has had a monster move in the last two months. Existing longs should enjoy it, but we might be on the verge of a new consolidation period.

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