Nasdaq rebalancing seen as a buying opportunity for Apple investors

Apple will be negatively impacted by the decision to re-weight its stock on the Nasdaq-100 Index, but the company's fundamentals remain strong, presenting a buying opportunity for investors.

Analyst Brian White with Ticonderoga Securities said the announcement on Tuesday that the Nasdaq would rebalance AAPL stock from 20 percent to 12 percent of its index of the 100 largest nonfinancial stocks is just the latest in a series of headwinds for Apple's market performance. The rebalancing, he said, adds "more noise to a loud past few months."

"Despite strong demand for Apple's products and a very successful launch of the iPad 2, the stock has been battling headwinds such as today's rebalancing announcement, along with concerns regarding Japan, Steve Jobs' health, concerns regarding a delayed iPad 2 launch (this was proven false), the timing of the upcoming iPhone 5 launch and general market noise," White said.

He believes these concerns will eventually subside, allowing investors to again focus on the company's fundamentals. White believes the company's stock will reach new all-time highs as the year progresses, as products like the iPhone, iPad and Mac lineup continue to experience year over year growth.

Specifically, he believes that continued strong demand for the iPad 2 epitomizes Apple's current success. Demand for Apple products is predicted to be a "phenomenon" that will continue to bring earnings surprises over the next 12 to 18 months.

"We also believe the buzz surrounding the iPad 2 launch is also driving a further halo effect around Apple's existing portfolio as consumers are drawn into stores," he said.

Ticonderoga Securities has a 12-month price target of $550 for AAPL stock, and a recommended buy rating for investors.

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26 Comments

anantksundaram

said about 13 years ago

If your horizon is at least a few years -- as it should be -- events like this are all noise around a longer-term trend.

will2

said about 13 years ago

Good thing I bought back when it was $15 per share. Gotta love Steve for that.

malax

said about 13 years ago

This is important information. Basically it means that AAPL's great stock price appreciation over the past few years caused it to assume a huge share of the S&P100. Obviously having 1 stock account for 20% of an index of 100 companies is a bit unbalanced. So they're reweighting it down to 12%. In practice, what this means is that the large number of index mutual funds that mirror the composition of the S&P100 will sell off nearly half their AAPL shares. That'll be a BIG sell-off and negatively affect the price of AAPL shares (in fact that might be what caused the big drop yesterday?). But as the analyst states, this is predictable and in no way statement of the market's displeasure with Apple, Inc.

Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.

eh270

said about 13 years ago

No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..

will2

said about 13 years ago

Quote:

Originally Posted by malax

Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.

Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.

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