Apple stock (AAPL) - Get Apple Inc. (AAPL) Report has officially reached a new all-time high. On July 7, shares of the Cupertino company finished the trading session valued at nearly $145, about a dollar above the previous peak reached in late January.
It was timely that Mad Money’s Jim Cramer offered commentary about Amazon’s second quarter performance that could just as well have been made about Apple. According to him:
“When I look at the winners in the second quarter, it tends to be companies that people counted out. They felt that once the pandemic was over, people would go back [to old consumption habits]. No one’s going back!”
(Read more from the Apple Maven: Apple Stock Nears All-Time Highs: What Next?)
Secular, not temporary
In my view, there are only two good reasons that explain why Apple share price maxed out below $145 earlier this year, and retraced as much as 19% from the peak:
- Impressive 2019-2020 performance that encouraged some investors to cash in their chips;
- Fears over “return to normal” spending habits, after the pandemic was over.
Of these two reasons to sell AAPL, I believe that the first was most defensible. Apple shares climbed over 80% in each of the past two years. It is reasonable that future gains may have been pulled forward as (1) the first 5G-capable iPhone was launched and (2) interest rates dropped to record lows last year.
The second bullet, still mentioned at times by the few bears left on Wall Street, has not been justified so far. There have been few, if any, signs that consumers are ready to set aside their tech devices and the services that they provide (streaming audio and video, payments, etc.).
Research published by Counterpoint suggests record-setting iPhone shipments in the past seven months, at 100 million units. For 2022, analysts expect the iPhone 13 cycle to outshine the current one. Meanwhile, JPMorgan has noticed reacceleration in App Store growth in June compared to the previous periods.
Nothing about Apple’s strong business performance as of late seems to be temporary or due for a retraction. For most of the first half of 2021, investors seemed skeptical. But AAPL’s new all-time high reached in early July may have squashed any negative sentiment that still lingered.
(Read more from the Apple Maven: Apple Stock: What To Expect Of The iPhone In Fiscal Q3)
Stock still looks good
Around the same time that Wall Street served Apple with its latest downgrade, from neutral to sell at a price target of only $90, the Apple Maven argued the exact opposite: that shares were finally ready for a rally, following several months of malaise.
Yes, about 16% worth of gains have already been realized in the past month alone. Therefore, were I to buy Apple stock today, I would set my expectations for more modest returns going forward than I believe could have been earned a mere few weeks ago.
But lack of “return to normal” headwinds, to Jim Cramer’s point, coupled with positive momentum, reasonable valuations and a summer season that tends to be bullish for AAPL keep me optimistic about owning shares at current levels.
Apple stock has finally made new all-time highs, after spending five months in a drawdown. Is this a positive, due to momentum and bullish sentiment, or a negative, due to richer valuations and overconfidence?
Is the price right?
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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)