Apple (NASDAQ 🙂 shares have been under pressure since hitting a record high in January. This lingering bearish wave casts doubts in the minds of investors about the company’s growth potential in the post-pandemic world.
Apple hit an all-time high on January 26, hitting $ 144.30 per share. On Friday, it closed at $ 124.61, down about 16%. Over the same period, the benchmark has remained virtually unchanged.
After a decline of this magnitude, it is difficult for some investors to resist the temptation of a low buy trade, especially when this strategy has paid off several times in the past for that particular stock. Apple stocks have gained about 400% over the past five years, nearly double the return provided by the NASDAQ index.
Despite the iPhone maker’s strong record in rewarding long-term investors, some analysts warn Apple stocks have a tough road ahead as the pandemic-induced boom in buying the latest hardware, cools down.
As employees return to their physical offices after the acceleration of the vaccination campaign in developed countries, the work-from-home demand for Apple hardware, including iPads and Mac computers, may also decline. In addition, the growing shortage of chips in the semiconductor industry could become a bigger issue for the company’s future production volumes.
Material downside risk
According to New Street Research, Apple will not be able to maintain strong sales for its flagship iPhone 12 during the current fiscal year. The confluence of events that made the iPhone 12 a success means demand has been pulled forward, creating disappointing follow-up risk in the company’s 2022 fiscal year, New Street said.
“We see significant downside risk – shipments in the 180-200 million range against consensus at 234 million, and a downgrade in the sell share.”
Additionally, New Street lowered its price target for Apple to $ 90 a share, 28% below the closing share price on Friday.
This extremely bearish outlook, however, is not what the majority of Wall Street analysts see for the rest of the year. Of 38 analysts covering the stock, 31 have a buy rating with a 12-month price target of $ 159.60.
Apple Bulls continue to believe that the company’s iPhone sales will remain strong as more customers switch to 5G-capable handsets.
JPMorgan analyst Samik Chatterjee said in his recent note that the 5G iPhone cycle is not only boosting important consumer upgrades and switches, it is also positioning Apple for a higher share of the overall market. smartphones.
Chatterjee, while increasing its price target to $ 165 from $ 150 and reiterating its overweight rating, said:
“We are increasing our revenue and profit estimates for FY21 on track, but more importantly, we are increasing our out-of-year revenue forecast for iPhone, Mac, iPad and services as we expect Apple to continue to leverage vigor with a stronger replacement cycle. drove demand and a greater opportunity for services over a larger installed base.
As of March 31, however, Apple’s cash-making machine has shown no signs of slowing down. CEO Tim Cook believes there is still room for iPhone growth with the new 5G cellular version of the device which is in its early stages.
The company reported record revenue of $ 89.6 billion for the quarter, up 54% from the previous year. Overall, iPhone revenue for the March quarter rose 65% to $ 47.9 billion from the 42% gain analysts had predicted.
At the end of the line
Apple stock is certainly losing some of its luster after a powerful rally during the pandemic. This weakness shows that investors are watching closely to see if the historic business success driven by the pandemic can continue.
This wait-and-see approach could keep Apple stock under pressure this year, unless the company once again breaks analysts’ growth forecasts.