Apple Stock This Week: A Rebound At Last
This could be the beginning of the end (of the correction) for Apple. Or at least this is what investors hope, following the stock’s decline of 20% from top to bottom so far this month.
After shares tanked nearly 5% last week, Apple recovered just about all these recent losses over the past five trading days, mostly on Thursday and Friday alone. The rest of the FAAMG group also found support, up about 2.5% for the week. The S&P 500 did not fare as well due to its better diversification outside tech, ending the five-day period slightly in the negative.
Apple is now 16% below its peak, still well into correction territory and not too far from the gateway to bear market. Yet, the stock is up more than 50% year-to-date. So far this year, Apple has outperformed the information technology (ticker $VGT) and consumer discretionary (ticker $VCR) sectors by at least 28 percentage points.
- Rebound is a feature of a correction: It is not rare at all for a stock to bounce back following a sharp decline. Apple’s share price unwind in the first three weeks of September was one of its fastest off an all-time peak ever. Sometimes, not many reasons are needed for a stock to recover in the short term.
- Is the iPhone 12 finally coming? The rumor mill has not been silent. MacRumors found evidence that the 5G-ready iPhone will be unveiled soon, likely in the first half of October – which means that Apple should be sending out an invitation for the event within the next week or two. As I have stated before, the sooner Apple’s new smartphone is announced, the faster investor sentiment may recover.
- Rare downgrade: it has been highly unusual for a Wall Street analyst to turn more bearish on Apple after holding a buy rating on the stock. This is what happened at UBS this week. The downgrade was supported by (1) expected service revenue deceleration, (2) aggressive valuations relative to growth prospects and (3) bad timing of owning the stock in the fourth quarter, following the expected announcement of the iPhone 12. UBS’ research report marked the only trading day in the week that Apple ended lower (sharply so, in this case).
Below is a chart that compares the performance of Apple stock against the S&P 500 and the industry. Apple’s dashboard looks great over time, and now a bit better from a trailing five-day perspective.
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