Will the Bubble Burst for these Triple-Digit Names?
Edgar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A stock that has been on everyone’s watch list is the half a trillion dollar market cap tech giant Apple (NASDAQ: AAPL). Short sellers were getting annoyed with this one as the stock’s continuous bullish momentum would leave bear carcasses, every time analysts called “top” formations near psychological key levels. It is as if all hell broke loose after a research analyst Walter Piecyk took the lead in downgrading the stock, citing that the company's margins could suffer if Apple is forced to cut its prices on its smart phones before the release of iphone 5. Phone carriers such as Verizon (NYSE: VZ), AT&T (NYSE: T), and Sprint (NYSE: S) do not see any incentives to further subsidize the upgrade costs that iphone users will eventually face. Another major shift was Apple’s transformation into a dividend stock from a growth name. As much as I thought this would deter the stock’s run-up, a part of me was convinced that paying a yield attracted a whole new set of investors and fund managers that otherwise would shun the stock.
What is noteworthy of a mention is that the downgrade came two weeks after CEO Tim Cook and CFO Peter Oppenheimer began unloading their shares near the $600 range. What was even more ironic, Apple’s 12-mo. target price was raised to $700-$1000 range during those weeks. Go figure! While we wait and see which analyst will get the gold medal in picking the right direction after Q2 earnings release date, I personally believe the stock will continue its upside and reach $1,000 mark even before it enters the TV market.
The next stock that could be classified as a forming “bubble” is Priceline.com (NASDAQ: PCLN). The reason for such a strong surge is that the stock is one of few companies that is able to grow its free cash flow 10% a year with 30% revenue growth. Given its phenomenal balance sheet and its continuous efforts in buying back shares, the stock remains to be an investor favorite. After purchasing Active Hotels and Bookings, Priceline established itself as the global leader in online travel services. Its record performance speaks for itself as $10,000 invested in the company five years ago would give you a whopping $135,000 today. However, a rising historical P/E of 35 and ongoing European debt worries is a major cause for concern as the company receives over half of its operating profits from international regions. I am a bull on the stock long term, but anxious to see how it will perform shortly after mother market regains its strength from recent volatility.
Motley Fool newsletter services recommend Apple and Priceline.com. The Motley Fool owns shares of Apple. edgarambart30 has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.