Stocks of Apple (NASDAQ 🙂 are showing signs of a spike. After a remarkable run through early September, the iPhone maker is now underperforming other top tech companies amid uncertainties about its growth in the post-pandemic world.
This three-month bearish period occurs after Apple became the first US company to make more than $ 2 trillion in market cap in August. Since then, its shares have lost 17% and closed at $ 115.17 yesterday.
In the past three months, the tech-heavy has gained about 5%, while Apple has lost more than 8%.
A major concern that is holding Apple's stock under pressure is whether the company will benefit from the potential economic recovery following the successful development of vaccines that could potentially normalize the global economy by the middle of next year.
Apple benefited significantly during the pandemic as an increase in laptop and iPad sales offset a significant drop in sales of its flagship iPhone. In October, the California-based company reported that its iPhone revenues were down 21% in the period ending September. However, sales, excluding phones, were up 25% from a year ago, with Mac computer sales reaching a record $ 9 billion.
Some analysts on the street are seeing the slow growth cycle of the iPhone extending well into 2021, when the boom will also be over. Goldman Sachs analyst Rod Hall, while lowering his company's price target for Apple from $ 80 to $ 75, said in a recent note that Apple is unlikely to see a massive jump in demand for the iPhone despite the launch. of new 5G compatible models.
Apple & # 39; s recent comment "points in the direction of the weaker 5G iPhone cycle we predicted rather than the" Super Cycle "expected by consensus," he wrote.
Apple generally introduces new iPhones models in September, boosting sales in the fourth quarter. But that production cycle was delayed this year due to interruptions in the supply due to the COVID-19 outbreaks. Apple introduced its 5G-compatible models after October 15, when the US and European countries were in the middle of the second COVID-19 wave.
Bullish Narrative
But if Apple is able to revive iPhone growth in the current quarter, it will justify the optimistic narrative of some analysts, who believe competitive pricing for the new models, the first major redesign in three years, and the appeal of higher speed may prompt users to upgrade their phones.
Despite the difficult conditions for iPhone sales and the raging pandemic during the second wave, there are still many reasons to believe that Apple stocks will not lose their luster during the economic revival. The company has plenty of ammunition available to cope with the various economic cycles and sustain its growth momentum.
Oppenheimer analyst Andrew Uerkwitz reiterated an "outperform" rating in a recent note, setting a price target of $ 125 for Apple after the company unveiled M1, the in-house developed system-on-chip (SoC) that will power future generations. of MacBook and Mac Mini products.
"M1 integrates CPU and GPU, as well as other functional blocks, to enable faster machine learning and better hardware security," he wrote in a recent note.
"The unified architecture of Apple hardware allows developers to extend their reach and provide a seamless software experience across devices."
In addition to these hardware upgrades, there is also significant momentum in Apple's services industry, such as video and fitness apps, for use on more than 900 million iPhones worldwide. Revenue from services more than doubled in fiscal 2019 compared to five years earlier. It was up 16% to $ 14.5 billion in the most recent quarter.
Bottom Line
Apple stock is likely to underperform during the fourth quarter as investors wait to see how consumers react to the latest iPhone models during the crucial holiday season. We recommend long-term investors to buy Apple stock if they are weak as the company is well positioned to capitalize on the economic recovery from a pandemic, supported by its constant innovation and thriving services business.
