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Apple Stock: Immune To Omicron Fears

As the S&P 500 continues to pull back, Apple stock has hit fresh highs. Here is why shares of the Cupertino company have, so far, been immune to Omicron fears.

New COVID-19 variant Omicron has started to wreak havoc in the stock market, causing short-term pain to investors that now see the major indices detach from all-time highs. But the same feeling has not been shared by Apple stock  (AAPL) - Get Apple Inc. Report holders, who have just seen the share price reach a fresh peak.

Over the past calendar week, which includes the Friday and Tuesday equity market selloffs, AAPL has been up around 2%, while the S&P 500  (SPY) - Get SPDR S&P 500 ETF Trust Report has been down just about as much. The Apple Maven believes that the Cupertino company has been successfully fighting market-wide fears over the pandemic with early signs that its holiday season will be better than many expected.

Figure 1: Apple's iPhone and iPad.

Figure 1: Apple's iPhone and iPad.

(Read more from the Apple Maven: Apple Stock: Holiday Season Starts, What Next?)

It starts with the iPhone

I have been writing quite a bit lately about how the iPhone 13 cycle is shaping up to be a strong one. Wedbush’s Dan Ives has been talking about 40 million iPhone units being sold between Black Friday and Christmas, which would be a record. Based on the analyst’s projections, I estimate that segment sales could rise 10% YOY above tough 2020 comps and despite the supply chain crisis.

Wall Street has slowly turned bullish on the iPhone’s 2021 holiday cycle as well. JPMorgan’s Samik Chatterjee spoke of Greater China serving as a booster for smartphone sales in fiscal Q1. New Street’s Pierre Ferragu, the most bearish of Apple analysts, has conceded that the region should, in fact, help Apple to produce strong numbers in the current quarter and increase the company’s market share.

Now, the iPad

The most recent bullish news has put the iPad at center stage. Canalys has reported that the iPad was, by far, the best-performing tablet in Europe in calendar Q3. The difference in performance between Apple’s device and the competition was not modest: a whopping 33% increase in shipments against an industry-wide decline of 20%.

It has become increasingly evident that Apple can perform very well when the tech industry is on fire, and still well above average when the sector hits a soft patch. This is probably why investors have been piling up on Apple stock and pushing share price higher, even though the market at large wants to head in the opposite direction.

Optimism about Apple’s holiday quarter results only begins to tell the story. Needham analyst Laura Martin points out that Apple’s new product pipeline is quite enticing, with new gadgets like mixed reality wearables likely being announced in the next 6 to 12 months. The bull case, therefore, seems to combine short-term catalysts and longer-term optimism for what the Cupertino company can deliver.

Twitter speaks

While the S&P 500 dips again on Omicron fears, Apple stock rises to all-time highs. Is this a sign to buy AAPL on strong momentum, or a sign to sell the rally?

Is the price right?

Looking at a company’s business fundamentals is only half the work needed to find a good stock. How much one pays to own the shares is a key factor in the success of any investment. This is why valuation analysis is so important.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)