Apple (AAPL) saw its shares jump into record high territory after its June-quarter earnings report. The consumer electronics giant surged to a market capitalization of over $2 trillion. 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 early stages of a major upgrade cycle with its first 5G iPhones.
Apple Stock News: iPhone 12 Debuts
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,” will permit depth sensing for photo and video applications, including faster autofocus in lowlight situations. Plus, it will open up new possibilities for augmented-reality experiences.
Sales reports have been positive for the iPhone 12 series, especially the more expensive models. That news has lifted Apple stock recently.
Apple debuted the iPhone 12 along with the HomePod Mini smart speaker 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.
On Nov. 10, the company introduced its first Mac computers running Apple-designed processors instead of chips from Intel (INTC). At the event, Apple showed off two notebook computers and one desktop computer running its M1 chip. The M1 chip delivers up to 3.5-times faster central processing unit performance than Intel-based Macs. The chip boasts up to six-times faster graphics processor unit performance. It also is much more power efficient. Apple stock dipped 0.3% on the day of the news.
Apple Opportunities For Growth
With iPhone growth slowing, 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 September quarter, Apple’s services revenue rose 16% to $14.5 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.
However, 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.
Meanwhile, Apple’s Wearables, Home and Accessories unit saw sales increase 21% in the September 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 Dec. 8, Apple introduced premium over-ear headphones called AirPods Max.
Apple Earnings: Beat And No Guidance
On Oct. 29, Apple delivered better-than-expected September-quarter results.
Apple earned 73 cents a share on sales of $64.7 billion in its fiscal fourth quarter ended Sept. 26. Analysts had predicted earnings of 70 cents a share on sales of $63.7 billion. On a year-over-year basis, Apple earnings fell 4% while sales rose 1%.
In the September quarter, iPhone sales fell 21% to $26.4 billion. Bullish Apple analysts said the big drop in iPhone revenue was simply a pause in consumer purchases ahead of a supercycle of upgrade activity related to the iPhone 12.
Meanwhile, Mac sales surged 29% to $9 billion and iPad tablet sales jumped 46% to $6.8 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 guidance for the December quarter, citing market uncertainties related to the coronavirus pandemic.
Exclusive Apple Stock Ratings
Since the bounce back from the lows of the coronavirus stock market crash, Apple stock has been outperforming the broader market.
AAPL stock has an IBD Relative Strength Rating of 83 out of 99. That puts it in the top 17% of stocks for performance over the past 12 months.
Apple stock has an IBD Composite Rating of 86 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. Amazon and Microsoft have since followed.
On Aug. 19, 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
The Dow Jones tech giant later passed a secondary buy point of 80.02 from a cup-with-handle base visible on a weekly MarketSmith chart. IBD Leaderboard analysis provided several additional buy points during its ascent.
On Sept. 2, Apple stock notched a record high of 137.98 on a split-adjusted basis in intraday trading. However, it ended the day down 2.1% amid a sell-off in technology stocks.
On Nov. 30, Apple stock got a boost after investment bank Morgan Stanley said the company is one of the best 5G wireless investment plays. AAPL stock closed the regular session on Dec. 22 at 131.88.
Is Apple Stock A Buy Right Now?
Apple stock is not a buy right now, but it soon could be.
AAPL stock has formed a cup base with a buy point of 138.08, according to IBD MarketSmith charts. Meanwhile, Leaderboard analysis identified two early-entry points for Apple stock ahead of the stock’s proper buy point.
Keep an eye on the overall stock market, which has been unsettled lately. 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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