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.
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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: iPhone 12 Supercycle?
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 for the more expensive models of the iPhone 12 series. But Apple recently slashed production of the entry-level iPhone 12 Mini. Apple stock slid on the news.
On April 20, Apple introduced its first Apple Silicon-powered iMac desktop computers and new iPad Pro tablets. It also unveiled its long-awaited lost item trackers called AirTags. However, Apple stock sank 1.3% after its spring product launch event.
Apple might wait until its annual Worldwide Developers Conference to introduce more new products. This year’s virtual WWDC is scheduled for June 7 to 11.
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 December quarter, Apple’s services revenue rose 24% to $15.8 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.
On April 6, Morgan Stanley analyst Katy Huberty said Wall Street’s consensus estimates for Apple’s services business are too low for the next two years.
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.
The European Union plans to bring antitrust charges against Apple related to the App Store in the coming weeks, according to news reports. The threat of regulatory action is a “headline risk” for Apple stock, says Wedbush Securities analyst Daniel Ives.
Apple Raises U.S. Investment Spending
Apple’s Wearables, Home and Accessories unit saw sales increase 30% to nearly $13 billion in the December quarter. This unit includes wearables like the Apple Watch, AirPods wireless earbuds and Beats headphones. It also contains the Apple HomePod wireless speaker and other miscellaneous gadgets.
On March 12, Apple announced that it has discontinued its original HomePod music speaker to focus on selling the smaller, less expensive HomePod Mini device. The HomePod Mini costs $99 vs. $349 for the larger model.
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 recently with Nissan and other automakers, according to news reports.
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 No Guidance
On Jan. 27, Apple delivered better-than-expected December-quarter results.
Apple earned $1.68 a share on sales of $111.44 billion in its fiscal first quarter ended Dec. 26. Analysts had predicted earnings of $1.41 a share on sales of $103.28 billion. On a year-over-year basis, Apple earnings rose 34% while sales climbed 21%.
In the December quarter, iPhone revenue jumped 17% to $65.6 billion, aided by the launch of the iPhone 12 series handsets. Apple’s iPhone business accounted for 59% of the company’s sales in the period.
Meanwhile, Mac computer sales surged 21% to $8.7 billion and iPad tablet sales jumped 41% to $8.4 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 guidance for the March quarter, citing market uncertainties related to the coronavirus pandemic. The company has not given financial guidance since the Covid-19 pandemic took hold in early 2020 and created uncertainty for its business. Apple stock fell 3.5% the day after the Q1 earnings report.
The next potential catalyst for Apple stock could be the company’s March-quarter earnings report. Apple plans to release its fiscal second-quarter results on April 28.
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 62 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 75 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.
Apple stock has since formed a cup base with a buy point of 145.19, according to IBD MarketSmith charts. It now is trading in a three-weeks-tight pattern, which could offer an alternative buy point above 135.50.
AAPL stock closed the regular session on April 23 at 134.32.
Is Apple Stock A Buy Right Now?
Apple stock is not a buy right now, but it soon could be. In a positive sign, AAPL stock is trading above its 50-day moving average line as it climbs the right side of its cup base.
However, AAPL stock has an IBD Accumulation/Distribution Rating of D+, indicating institutional selling of shares.
In the fourth quarter, Warren Buffett’s Berkshire Hathaway (BRKB) sold about 57 million Apple shares, worth about $7.4 billion.
Keep an eye on the overall stock market. If the market turns south, don’t try to fight the general stock market direction.
To find the best stocks to buy and watch, check out IBD’s Stock Lists page. More stock ideas can be found on IBD’s Leaderboard, MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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