Stocks of Apple (NASDAQ 🙂 have been under pressure since reaching a record high in January. This ongoing bearish spell makes investors' minds question the company's growth potential in the post-pandemic world.
Apple hit an all-time high on January 26, hitting $ 144.30 a share. On Friday, it closed at $ 124.61, down about 16%. During the same period, the reference index remained virtually unchanged.
After falling this size, the temptation for a buy-on-the-dip transaction is difficult for some investors to resist, especially when this strategy has repeatedly paid off for this particular stock in the past. Apple shares have gained about 400% in the past five years, nearly double the return of the NASDAQ index.
Despite the iPhone maker's excellent track record of rewarding long-term investors, some analysts warn that Apple stocks have a tough road ahead as the pandemic boom of buying the latest hardware abates.
As employees return to physical offices following the increasing urge to vaccinate in the developed world, home demand for Apple hardware – including iPads and Mac computers – may also decline. In addition, increasing chip shortages in the semiconductor industry could become a bigger problem for the company's future production volumes.
Material Downside Risk
According to New Street Research, Apple will be unable to sustain strong sales for its flagship iPhone 12 in the current fiscal year. means demand has moved forward, posing the risk of a disappointing follow-up in the company's 2022 fiscal year, New Street said.
"We see a material downside risk – shipments in the 180-200 million range versus the consensus of 234 million, and a reduction in inventory to sell."
Likewise, New Street lowered its target price for Apple to $ 90 a share, which is 28% lower than where the stock closed on Friday.
However, this extremely bearish outlook is not what the majority of Wall Street analysts see for the remainder of the year. Of the 38 analysts researching the stock, 31 have a buy rating with a 12-month price target of $ 159.60.
Apple bulls continue to believe the company's iPhone sales will remain strong as more customers upgrade to 5G-compatible handsets.
JPMorgan analyst Samik Chatterjee said in his recent note that the 5G iPhone cycle is not only leading to strong upgrades and switches for consumers, but is also positioning Apple for a greater share of the total smartphone market.
Chatterjee said, raising his price target from $ 150 to $ 165 and reiterating his overweight rating:
“We are raising our revenue and earnings expectations for FY21 based on strength, but more importantly, we are also raising our expectations for iPhone, Mac, iPad and Services revenues for the year as we expect Apple to continue to build on the strength with stronger replacement cycle-led demand and more capabilities for Services on a larger installed base. "
However, for the period ending March 31, Apple's cash machine showed no sign of slowing down. Chief Executive Tim Cook believes there is still room for iPhone growth with the newly introduced 5G mobile version of the device still in its early growth period.
The company reported record sales of $ 89.6 billion for the quarter, up 54% from a year earlier. Overall, iPhone revenues for the March quarter were up 65% to $ 47.9 billion, from the 42% gain analysts predicted.
Bottom Line
The Apple stock is certainly losing some of its shine after a powerful rally during the pandemic. This weakness shows that investors are watching closely to see if historic, pandemic-induced business success can continue.
This wait-and-see approach could keep Apple's stock under pressure this year unless the company again overturns analysts' growth forecasts.
