Back in April, I said Apple’s valuation looked relatively attractive compared to a number of its high-tech peers. At the time, the stock was trading at 15.9 times the company’s forward earnings. Today its valuation is up to about 29 times its forward earnings; AAPL stock isn’t looking quite so cheap anymore.
In fact, Apple’s price-earnings ratio, its price-sales ratio, its price-book ratio, its enterprise multiple and its price–cash flow ratio are all currently more than twice their five-year averages.
With the stock priced for beyond perfection, a bad quarter, product flaws, production issues, a cyber-incident, or competitive disruption could lead to a large correction.
At the same time, the valuations of the entire tech sector have gotten historically stretched as well. For much of the past decade, the S&P 500’s tech sector traded at a forward P/E multiple of around 15 times. Today that forward earnings multiple is 25.5 times.
The good news is that the tech sector’s forward earnings multiples are still nowhere near the peak of the dot-com bubble when they climbed above 45.
But 25.5 times is the highest level since 2004. If last month’s tech selloff resume, Apple will certainly get pulled down with the rest of the group.
Unfortunately, Apple may not even need to misstep to trigger a correction by AAPL stock. Expectations surrounding the upcoming launch of the iPhone 12 are through the roof. The iPhone 12 is expected to be Apple’s first 5G-compatible phone.
Demand for a 5G iPhone will be large. But demand for the product may not be as big or come as quickly as Apple’s 57% rally so far this year suggests.
5G coverage is still limited, and its unlikely consumers will pay extra for features they can’t use. Starting in the fall of 2021 demand for iPhone 5G will quicken, and we anticipate three years of 10-15% annual iPhone revenue growth, which compares to flat iPhone growth over the previous three years.
In other words, iPhone 12 may end up being a bullish catalyst for AAPL stock, but the positive catalyst may not play out until around a year from now. In fact, much like the recent Tesla Battery Day, Apple investors sitting on big gains may even see the upcoming iPhone 12 launch as a sell-the-news event.
Apple Inc. designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players.
The Company sells a range of related software, services, accessories, networking solutions, and third-party digital content and applications.
The Company’s segments include the Americas, Europe, Greater China, Japan and Rest of Asia Pacific.
The Americas segment includes both North and South America. The Europe segment includes European countries, India, the Middle East and Africa.
The Greater China segment includes China, Hong Kong and Taiwan.
The Rest of Asia Pacific segment includes Australia and the Asian countries not included in the Company’s other operating segments.
Its products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 127.65.
The projected lower bound is: 106.71.
The projected closing price is: 117.18.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 88.9365. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 54.19. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 19 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 107.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
APPLE INC closed up 0.980 at 116.790. Volume was 29% below average (neutral) and Bollinger Bands were 20% narrower than normal.
Open High Low Close Volume 117.640 117.720 115.830 116.790 116,120,440
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 111.80 113.37 86.27 Volatility: 47 59 59 Volume: 163,084,608 186,065,904 169,447,584
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
APPLE INC is currently 35.4% above its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods.
Our volume indicators reflect moderate flows of volume out of AAPL.O (mildly bearish). Our trend forecasting oscillators are currently bearish on AAPL.O and have had this outlook for the last 14 periods.