Shares of Apple (NASDAQ:) have regained momentum after a slow start to the year. The iPhone maker is up about 18% in the past quarter, more than double the gain of the benchmark index.
Apple Weekly Chart.
After this powerful move, many investors are wondering: is now the right time to buy this excellent technology stock?
Their hesitation is understandable given the post-pandemic uncertainty about consumer demand for the company's best-selling hardware, including laptops, watches and iPads.
Their argument is that as the global economy gradually reopens after the mass vaccination campaign, the demand for work-from-home Apple hardware will also decline. In addition, the increased regulatory oversight facing some of the largest tech companies could pose a serious challenge to future growth. Apple shares fell more than 3% last Friday after the company was ordered by a court to allow developers to direct consumers to third-party payment methods for mobile apps.
These arguments certainly make sense, but investors should not ignore the California-based company's vast ability to rapidly grow profits and revenue. Sales of iPhones, Apple's core product, grew about 50% despite being one of Apple's slowest periods, with consumers waiting for new phones to launch around September.
Behind this continuous growth cycle lies the company's tremendous innovative capabilities that not only keep existing consumers on the line, but also open up new growth areas.
Significant upside potential
The growth prospects for the largest US company is still going strong, according to a recent report from JPMorgan, which reiterated its overweight rating to Apple and raised its price target for the stock to $180.
JPMorgan note said:
"We are further increasing our iPhone volume estimates for the CY22 (to 246 million units), and are still seeing a significant increase from the consensus forecast, which admittedly has increased in recent months due to stronger iPhone 12 volumes."
The consumer tech giant released the iPhone 12 last year that boosted sales despite pandemic-related supply chain problems. The company yesterday unveiled the iPhone 13, which has new camera features and faster processors.
However, JPMorgan says demand for the iPhone 13 will be muted compared to the 12, which was seen as a bigger update, but expects 5G capability to continue to boost sales.
JPMorgan's optimistic views are in line with the general consensus on Wall Street. According to an Investing.com poll, about 80% of the 41 analysts who follow Apple have an "outperform" rating for the stock. On average, they expect Apple to rise another 12% over the next 12 months from Tuesday's closing price.
Consensus estimates for Apple.
In the short term, however, Apple stock could become weak. Shares of the tech giant have fallen 75% of the time on iPhone unveiling days, according to data collected by Bloomberg. “Any positive impact from a new release is usually already priced into the inventory,” said Bespoke Investment Group to clients.
Starting point
Most analysts still see more gains in Apple stock, fueled by the company's new 5G-enabled iPhone models and growing revenues from services and other hardware offerings.
