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Apple Nears All-Time High: Is the Tech Giant Too Extended?
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Apple stock has been in ultrasonic mode this year. After a series of higher highs and higher lows along with fresh 52-week highs, Apple (AAPL - Free Report) shares have now soared back near all-time highs, as the iPhone maker has benefitted from strength in the large-cap tech space. The bullish theme around artificial intelligence certainly hasn’t hurt either.
Following a greater than 50% surge in 2023, are Apple shares now too far extended, or is the rally just getting underway?
Image Source: StockCharts
Buying at New All-Time Highs
Purchasing stocks at new all-time highs following a bear market has proven to be successful in the past. It’s the market’s way of telling us that higher prices are on the horizon. And when we analyze the state of the economy with a sustained deceleration in inflation, better-than-expected corporate earnings, and a resilient U.S. consumer, there’s plenty of reasons to suspect that the momentum can continue.
Despite the technical progress this year, most professional fund managers (along with individual investors) were underweight stocks, missing the majority of the rally. The lack of respect for the market’s recovery aided the bullish move off the 2022 bear market lows.
It’s normal to expect that the rally won’t continue, but history tells us otherwise. The S&P 500 is less than 4% away from its own all-time high set back in January of 2022. The previous 14 times that the blue-chip index went at least a full year without a new high and then finally made one, a year later it was higher 13/14 times and up nearly 15% on average.
The Business of Apple
Apple is engaged in the designing, manufacturing, and marketing of mobile communication and media devices, personal computers, and portable digital music players. Headquartered in Cupertino, California, Apple’s well-known products include the iPhone, iPad, Mac, and Apple TV, along with its software applications like iOS and the MAC OS X operating systems.
In addition to the sales generated from the devices mentioned above, Apple’s business contains a Services segment that includes revenues from cloud services, the App Store, Apple Music, AppleCare, Apple Pay, as well as other licensing services that have become a major cash cow. Apple currently has more than 935 million paid subscribers across the Services portfolio.
If that all wasn’t enough, Apple dominates the Wearables market, as consumers continue to adopt products like the AirPods and Apple Watch. Apple has made significant headway in this area, strengthening its presence in the personal health monitoring space. Other services include Apple News+, Apple Card, and Apple Arcade.
An increased focus on autonomous vehicles and augmented reality technologies presents a growth opportunity over the long-term. Apple is expected to ramp up its efforts with new offerings, and has clearly benefitted from the AI theme this year.
Apple Stock – The Zacks Rundown
Apple is part of the Zacks Computer – Mini Computers industry, which currently ranks in the top 36% of all Zacks Ranked Industries. Because it is ranked in the top half of all industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has year-to-date with a 50% return:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Apple has exceeded earnings estimates in three of the past four quarters. The company most recently delivered fiscal fourth-quarter earnings back in November of $1.46/share, beating the $1.39 Zacks Consensus Estimate by 5.04%. Apple has delivered a trailing four-quarter average earnings surprise of 3.47%.
AAPL is currently a Zacks Rank #3 (Hold) stock. The tech giant is projected to see earnings grow 7% in the current fiscal year on revenues of $393.4 billion. Given Apple’s history of beating estimates, it wouldn’t be too surprising if these figures ended up being a bit light.
What to Do Now
Buying stocks when they make new highs has proven to be profitable throughout history. A stock eclipsing a previous high should be viewed as a sign of strength. Apple appears to be breaking out of a multi-month consolidation pattern, bolstering the bullish case.
The market is telling us to expect the unexpected. A buoyant U.S. consumer along with a bullish artificial intelligence theme have helped push tech stocks like AAPL back near previous highs. Make sure to keep an eye on this tech behemoth as the stock inches closer to a new all-time high.
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Apple Nears All-Time High: Is the Tech Giant Too Extended?
Apple stock has been in ultrasonic mode this year. After a series of higher highs and higher lows along with fresh 52-week highs, Apple (AAPL - Free Report) shares have now soared back near all-time highs, as the iPhone maker has benefitted from strength in the large-cap tech space. The bullish theme around artificial intelligence certainly hasn’t hurt either.
Following a greater than 50% surge in 2023, are Apple shares now too far extended, or is the rally just getting underway?
Image Source: StockCharts
Buying at New All-Time Highs
Purchasing stocks at new all-time highs following a bear market has proven to be successful in the past. It’s the market’s way of telling us that higher prices are on the horizon. And when we analyze the state of the economy with a sustained deceleration in inflation, better-than-expected corporate earnings, and a resilient U.S. consumer, there’s plenty of reasons to suspect that the momentum can continue.
Despite the technical progress this year, most professional fund managers (along with individual investors) were underweight stocks, missing the majority of the rally. The lack of respect for the market’s recovery aided the bullish move off the 2022 bear market lows.
It’s normal to expect that the rally won’t continue, but history tells us otherwise. The S&P 500 is less than 4% away from its own all-time high set back in January of 2022. The previous 14 times that the blue-chip index went at least a full year without a new high and then finally made one, a year later it was higher 13/14 times and up nearly 15% on average.
The Business of Apple
Apple is engaged in the designing, manufacturing, and marketing of mobile communication and media devices, personal computers, and portable digital music players. Headquartered in Cupertino, California, Apple’s well-known products include the iPhone, iPad, Mac, and Apple TV, along with its software applications like iOS and the MAC OS X operating systems.
In addition to the sales generated from the devices mentioned above, Apple’s business contains a Services segment that includes revenues from cloud services, the App Store, Apple Music, AppleCare, Apple Pay, as well as other licensing services that have become a major cash cow. Apple currently has more than 935 million paid subscribers across the Services portfolio.
If that all wasn’t enough, Apple dominates the Wearables market, as consumers continue to adopt products like the AirPods and Apple Watch. Apple has made significant headway in this area, strengthening its presence in the personal health monitoring space. Other services include Apple News+, Apple Card, and Apple Arcade.
An increased focus on autonomous vehicles and augmented reality technologies presents a growth opportunity over the long-term. Apple is expected to ramp up its efforts with new offerings, and has clearly benefitted from the AI theme this year.
Apple Stock – The Zacks Rundown
Apple is part of the Zacks Computer – Mini Computers industry, which currently ranks in the top 36% of all Zacks Ranked Industries. Because it is ranked in the top half of all industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has year-to-date with a 50% return:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Apple has exceeded earnings estimates in three of the past four quarters. The company most recently delivered fiscal fourth-quarter earnings back in November of $1.46/share, beating the $1.39 Zacks Consensus Estimate by 5.04%. Apple has delivered a trailing four-quarter average earnings surprise of 3.47%.
AAPL is currently a Zacks Rank #3 (Hold) stock. The tech giant is projected to see earnings grow 7% in the current fiscal year on revenues of $393.4 billion. Given Apple’s history of beating estimates, it wouldn’t be too surprising if these figures ended up being a bit light.
What to Do Now
Buying stocks when they make new highs has proven to be profitable throughout history. A stock eclipsing a previous high should be viewed as a sign of strength. Apple appears to be breaking out of a multi-month consolidation pattern, bolstering the bullish case.
The market is telling us to expect the unexpected. A buoyant U.S. consumer along with a bullish artificial intelligence theme have helped push tech stocks like AAPL back near previous highs. Make sure to keep an eye on this tech behemoth as the stock inches closer to a new all-time high.