Shares of Apple (NASDAQ:AAPL) will continue to deflate until they fall to $425, according to Jeffrey Gundlach, the founder of DoubleLine Capital and a known for taking aggressive short positions on the iPhone maker.
“I deeply believe Apple is headed to $425 a share,” Gundlach told CNBC’s “Squawk on the Street” on Thursday. “Not because I’m a bond guy or stock guy, but because I’m a market guy. I’ve been around for a long time and I know that when something goes vertical like Apple did from $425 once the bubble pops it goes back down to the point at which it lifted off.”
Apple fell a little less than 25 percent from a record closing high of $702.10 in mid-September until the end of December, but rose just under 3 percent on Wednesday as some of the bulls returned with optimistic predictions. A fall to $425 would mean another 22 percent drop from the current range. Gundlach said the stock was currently in a “consolidation period” and will only hover around this level “as long as the stays locally reasonably strong.”
The bond investor also had a warning for the larger market, saying a potential bubble could form in credit risk as investors increased their leverage on riskier debt securities, such as junk bonds and debt.
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“The next move that will start happening in the industry is that funds will start leveraging credit risk to a greater extent, which will build up an overexposure potentially should the market turn against bonds later on,” Gundlach told CNBC.
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