There are certain publicly-traded companies that have developed cult-like followings. As a result their stock prices have soared. But having all eyes on you can be a negative too. With that in mind, today we will take a deeper dive into some very popular names and discuss their chances of seeing further upside to their stocks.

IN PICTURES: 9 Ways To Use A Tax Refund

Is the Apple Rotten or Ripe?
Apple (Nadsaq:AAPL) has very some passionate shareholders. The reason behind that passion is simple. The company has consistently delivered to market a number of high-profile products which have been wildly popular, ranging from the iPod to the iPad, which is known around the world. And going forward there is anticipation that it will continue to surprise Wall Street, and consumers interested in electronics with new and exciting items, well into future periods. Beyond that, the company has been delivering on the earnings front and is coming off a much better-than-expected quarter.

Earlier in the week it released its second-quarter numbers, and in that period it earned an incredible $3.33, way ahead of the $2.45 the sell side had anticipated. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)

However, there is a downside to this cult-type stock. The primary concern is that it's very unlikely that the company will be able to beat expectations by such large amounts indefinitely. Sooner or later due to economic or company-specific reasons it will likely fail to please the Street on some level and when it does, the stock could get hammered. The fact that the company trades in the general neighborhood of 20 times this year's estimate provides little comfort.

Those that think that Apple is unsinkable would be wise to consider the once seemingly indestructible JDS Uniphase (Nasdaq:JDSU) or Microsoft (Nasdaq:MSFT). Each of those stocks is well off historic highs and their respective fan clubs seem to have died down quite a bit in recent years.

Search for Another Stock, or a Buy Ticket?
Google (Nasdaq:GOOG) is a company that has developed an amazing reputation. The company is constantly in the news thanks to its incredibly intelligent and well-connected chief executive, Eric Schmidt. Also, it has delivered an amazing string of earnings beats that would make many a public company's mouth water. Its most recently reported earnings beat came earlier this month. Maybe not surprisingly, the stock now trades at more than $544 a share.

But there are concerns, namely its ability to continually surprise the Street on the earnings front. Also, if Yahoo (Nasdaq:YHOO) were to have an amazing resurgence under the leadership of Carol Bartz, some investors could switch camps. While they may at times seem indestructible, don't be fooled.

The Bottom Line
Cult-type stocks are high-flying stocks that do well. But they aren't indestructible and it would be wise for investors to keep that in mind. Under the right circumstances both Apple and Google could be vulnerable and see sizable downside from current levels.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  2. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  3. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  6. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  7. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  8. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  9. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  10. Investing News

    Corporate Bonds or Stocks: Which is Better Now?

    With market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!