Risks To Apple Hitting $400 Abound (AAPL)

The consensus is that Apple AAPL shares will hit $400 and beyond in the coming months. The consensus is hardly ever correct, and experience teaches us that when everyone is on one side of the trade, it is time to get out. That is exactly where we are with Apple. This stock is the most loved, and most owned stock on Wall Street. This is usually not a good combination. There are two potential developments that would likely derail Apple in the coming months. The first is if Steve Jobs health gets worse. Many professional investors already believe that Jobs will not be returning from his most recent health-related hiatus. If this becomes official, it is going to hit the stock. Jobs is the face of the company and Apple's meteoric rise has been a direct result of his tenure. Investors may be underestimating how big of a blow Jobs permanent departure could be on the stock price. The other potential problem that Apple could face is a significant decline in the stock market. The company has gotten so large that it now accounts for 20% of the Nasdaq 100. In a large decline, AAPL is going to get hit hard because of ETF selling and the fact that so many people are long the stock with big profits. Margin debt on the NYSE is back at pre-crisis levels. Furthermore, the ratio of call to put buying is at record levels. This is a one way market right now, and if it gets derailed there is going to be significant selling pressure across the board. Investors that get hit with margin calls will look to liquidate AAPL because it has been a big winner and it is an extremely liquid name. Such a situation would be compounded by the fact that many investors are playing Apple using margin, which would exacerbate the selling pressure. While Apple may very likely continue to chug higher, the amount of optimism and consensus that is tied into this name should make cautious investors concerned. Don't be surprised if AAPL re-tests $300 before seeing $400 and beyond.