Apple (AAPL) saw its shares jump into record high territory ahead of the consumer electronics giant’s December-quarter earnings report. But with a pullback in Apple stock, many investors are wondering if AAPL stock is a buy right now.
Apple has been an American success story several times over. First, it ignited the personal computer revolution in the 1970s with the Apple II. Then it reinvented the PC in the 1980s with the Macintosh.
Co-founder Steve Jobs returned to run Apple in 1997 and oversaw a winning streak of innovations that included the iMac, iPod, iTunes, iPhone, iPad and the App Store.
The biggest driver of Apple’s modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.
But iPhone sales have slowed as users hold on to their handsets for longer periods between upgrades. However, the company could be in the midst of a major upgrade cycle with its first 5G iPhones.
Apple Stock News: Privacy Initiatives
The Cupertino, Calif.-based company began selling the 5G-enabled iPhone 12 series on Oct. 23. The handsets have display sizes of 5.4, 6.1 and 6.7 inches and starting prices ranging from $699 to $1,099.
In addition to ultrafast 5G wireless connectivity, the 14th-generation iPhones have improved cameras, speedier processors and a new design. The Pro models of the iPhone 12 have a new rear-facing lidar scanner. Lidar, short for “light detection and ranging,” permits depth sensing for photo and video applications, including faster autofocus in lowlight situations. Plus, it will open up new possibilities for augmented-reality experiences.
Apple debuted the iPhone 12 series at an online event on Oct. 13. However, investors were unimpressed. Apple stock fell 2.7% the day of the iPhone 12 debut. It was Wall Street’s worst reception ever to an iPhone launch.
Sales reports have been positive, especially for the more expensive models of the iPhone 12 series. But there are signs of a slowdown in iPhone 12 sales, starting in the June quarter.
Meanwhile, Apple introduced its first Apple Silicon-powered iMac desktop computers and new iPad Pro tablets on April 20. It also unveiled its long-awaited lost item trackers called AirTags. However, Apple stock sank 1.3% after its spring product launch event.
At the company’s annual Worldwide Developers Conference, which ran June 7 to 11, Apple previewed new privacy protections for users of its devices. Apple will mask a user’s location and activity in its email app and on the Safari web browser. It also will provide more detail on how apps are using personal data through its App Privacy Report. Apple stock rose modestly for the week.
Apple Opportunities For Growth
With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.
Lately, two businesses have given Apple’s sales and profits a boost: services and wearables.
In the March quarter, Apple’s services revenue rose 27% to $16.9 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.
Meanwhile, Apple is facing antitrust scrutiny in the U.S. and Europe for its App Store policies, including its 30% commission fee. On Nov. 18, Apple cut its commission rate to 15% for small developers, possibly to appease regulators. But Apple stock trended down in the days after that news.
On April 30, the antitrust commission of the European Union issued preliminary charges against Apple in a case initiated by a complaint from Spotify Technology (SPOT). The European Commission accused Apple of abusing its dominant position in the distribution of apps through its App Store. Apple stock fell 1.5% on the news.
In May, Apple defended itself in U.S. federal court in a case brought by Epic Games, which accused the tech giant of anticompetitive business practices with its App Store. The judge in the case will make a ruling sometime in the next few months.
Apple Raises U.S. Investment Spending
Apple’s Wearables, Home and Accessories unit saw sales increase 25% to $7.8 billion in the March quarter. This unit includes wearables like the Apple Watch, AirPods wireless earbuds and Beats headphones. It also contains the Apple HomePod Mini wireless speaker and other miscellaneous gadgets.
Recently, speculation has risen that Apple is looking to make a self-driving electric car. Those rumors picked up steam in January when Hyundai reported early discussions with Apple about a car partnership. Apple also has held talks with Nissan and other automakers, according to news reports.
On June 10, Bloomberg reported that Apple hired Ulrich Kranz, a former BMW executive and the recently departed chief executive and co-founder of electric-vehicle startup Canoo, to work on its Apple car venture. Also, Reuters reported June 8 that Apple is in early-stage talks with China’s CATL and BYD about supplying batteries for its planned electric vehicle.
But the Apple car rumors haven’t lifted Apple stock. AAPL stock has declined since the company’s fiscal first-quarter earnings report.
Meanwhile, Apple is increasing its investments in U.S. manufacturing, research and development, and job creation. On April 26, Apple pledged to spend $430 billion over the next five years to create 20,000 new jobs in the U.S. The company said it is outpacing its original five-year goal of $350 billion in U.S. investments set in 2018.
The investments include a new campus in North Carolina as well as research and development in 5G wireless, artificial intelligence and semiconductor technology. The increased spending also covers data center investments and dozens of Apple TV+ productions.
Apple Earnings: Beat And Cautious Guidance
On April 28, Apple delivered a blowout March-quarter report.
Apple earned $1.40 a share on sales of $89.58 billion in the quarter ended March 27. Analysts had predicted earnings of 99 cents a share on sales of $77.35 billion. On a year-over-year basis, Apple earnings surged 119% while sales rose 54%.
In the March quarter, iPhone revenue soared 66% to $47.94 billion. Apple’s iPhone business accounted for 53.5% of the company’s sales in the period.
Meanwhile, Mac computer sales surged 70% to $9.1 billion and iPad tablet sales jumped 79% to $7.8 billion. The work-from-home and school-at-home trends driven by the Covid-19 pandemic fueled the gains in both product categories.
Apple did not issue specific guidance for the June quarter, citing market uncertainties related to the coronavirus pandemic. However, the company said it expects a more dramatic seasonal sales decline from the March quarter to the June quarter than in prior years. Apple stock dipped a fraction after the earnings report.
The next potential catalyst for Apple stock likely will be its fiscal third-quarter earnings report, due in late July.
Exclusive Apple Stock Ratings
Apple stock has been generally underperforming the broader market since the tech stock selloff, which started in mid-February.
AAPL stock has an IBD Relative Strength Rating of 43 out of 99. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.
Apple stock has an IBD Composite Rating of 71 out of 99, according to the IBD Stock Checkup tool. IBD’s Composite Rating combines five separate proprietary ratings of fundamental and technical performance into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
In August 2018, Apple became the first company to reach a market value of over $1 trillion. Since it hit that milestone, Microsoft (MSFT), Amazon.com (AMZN) and Google-parent Alphabet (GOOGL) have joined it in the trillion-dollar club.
Apple stock was the first to gain a market value of over $1.5 trillion in early June 2020. Amazon, Google and Microsoft followed.
On August 2020, AAPL stock became the first to reach a market cap of $2 trillion. Longtime Apple analyst Gene Munster, managing partner at Loup Ventures, said Apple stock could reach a $3 trillion market cap sometime this decade.
AAPL Stock Technical Analysis
Apple stock got a boost on Nov. 30 when investment bank Morgan Stanley said the company is one of the best 5G wireless investment plays.
On Jan. 22, Apple stock broke out of a cup-with-handle base at a buy point of 138.89, according to IBD Leaderboard analysis. Apple stock notched a record high of 145.09 on Jan. 25 on expectations for a strong holiday-quarter report.
However, AAPL stock dropped following its December-quarter earnings report and fell out of the buy zone. On Feb. 17, Apple stock triggered a stop-loss sell rule, according to IBD trading principles.
On April 29, Apple stock attempted to break out of a cup-with-handle base at a buy point of 135.63, according to IBD MarketSmith charts. It climbed as much as 2.6% to 137.07 before retreating. Apple stock ended the day down a fraction to 133.48.
AAPL stock closed the regular session on June 10 at 126.11.
Is Apple Stock A Buy Right Now?
Apple stock is not a buy right now. AAPL stock has been down since the tech stock sell-off earlier this year.
Apple stock has formed a flat base at a buy point of 137.17, according to IBD MarketSmith charts. But it’s trading in the lower half of its base. So, it likely will face overhead resistance before approaching its next formal buy point.
In a negative sign, Apple stock has been dwelling beneath its 50-day moving average line for about a month.
Plus, AAPL stock has an IBD Accumulation/Distribution Rating of D-, indicating heavy institutional selling of shares.
Keep an eye on the overall stock market. If the market turns south, don’t try to fight the general stock market direction.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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