This week’s fresh record closing price on shares of Apple reminds Wall Street and Main Street alike of their potency.
Since the beginning of June, the price index has risen by about 20% and numerous indicators show they’re just getting started.
For those investors who have been worried about escalating inflation recently, this run will put those concerns to rest for the time being.
CAGR of 50%
In a basic sense, Apple is still a money-making machine.
Revenue rose more than 50% year-over-year, in parallel with the earnings release, which exceeded expectations.
Tim Cook’s company has established an industry-leading benchmark that they constantly exceed.
For instance, revenue from the Mac suite came in at $9.1 billion for the quarter, which is a good beat that more appropriately fits the profile of a young digital start-up.
Management raised the company’s dividend by 50% and increased its previous share repurchase programme by $90 billion.
A dividend increase and a share repurchase programme are favourable indicators that management can send to investors.
The former says that they foresee sales and profit growing in the long-term, allowing for a greater pay out.
Shortsales in the weeks that followed this are hardly surprising.
As such, there are no bears, but.
A month ago, the Bank of America predicted that Apple would face increasingly challenging comparisons towards the end of the year.
Specifically, they believe the company’s App Store is underperforming and sales projections for the upcoming quarter are already too optimistic.
These gloomy statements matched those previously said by New Street Research, who downgraded their Apple rating in late May.
They’ve changed them from Neutral to Sell, and reduced their price target from $90 to $90.
In their view, “how things shape up for next year” is the crucial question, with an increase in overall demand and no known future iPhone upgrade having advanced the super-timetable. cycle’s
However, their concerns are shared by few, if any, others.
Most recently, Oppenheimer reiterated their Outperform rating, with Wedbush upping their price target to $185, which is above the street high.
This highlights a market opportunity for Apple in the range of 30%, and loudly foreshadows continued advances in the stock for the remainder of the quarter.
For us sitting on the sidelines, there isn’t anything to criticise about Apple currently.
The Price-to-earnings ratio (P/E) of 32 does not put them in the severely overvalued category as some of their Silicon Valley contemporaries; on the other hand, year-over-year sales growth of 50% is quite promising.
At this time, the stock’s RSI (relative strength indicator) is reaching 80, indicating that it may be hot, but if any company can bear that kind of price gain, it’s Apple.
A cyclical stock is one that is sensitive to macroeconomic or systemic changes in the broader economy. In prosperous economic times, these equities exhibit substantial growth due to discretionary consumer spending.
That means the opposite is also true. When the economy is down, these equities may underperform other stocks.
Travel and entertainment stocks are prevalent among cyclical equities. There are several types of cyclical industries that do well during periods of economic expansion but tend to drag behind in recessions.
Why are cyclical equities relevant to a portfolio?
Believe it or not, it’s for the consistency they bring. Growth stocks attract speculators, but they are susceptible to bubbles. Cyclical equities have price movement that is predictable, but not completely.
This presentation focuses on cyclical stocks as we emerge from the pandemic. And from a stronger starting point, these equities stayed stable during the pandemic.