Apple Moved Big Last Week, What Comes Next?

by Trefis Team
Rate   |   votes   |   Share

Apple’s (NASDAQ:AAPL) stock has tanked over 15% in the last 5 trading days, while the S&P 500 has fallen about 12% driven by the broader technology stock selloff. The most identifiable reason behind Apple’s fall appears to be concerns around inflated valuation amid slowing iPhone sales growth prospects. So what comes next? Could this move indicate the beginning of a trend? We think that there is a very real possibility of a sustained downward trend.

We arrive at our conclusion by assessing Apple’s recent market movement from three perspectives:

  1. relative positioning in the market
  2. underlying financial trends, and
  3. the output of the Trefis machine learning engine which looks at past patterns to predict near term behavior.

Our dashboard Big Movers: Apple Moved -15.9% – What Next? lays this out.

What relative positioning suggests: Are you a value investor who identifies and invests in under-priced securities based on market comparisons? Then this might be important to you.

Including this recent move, Apple has yielded a massive 80% to investors this year so far already. While Apple’s trailing P/E multiple has decreased more than 15% to 34x as a result of the recent move, it still stands about 40% above the figure of 24x at the beginning of the year. So the stock has become significantly more expensive this year. With the exception of Amazon, a peer comparison indicates that Apple may not have much more room to grow. Compared to Apple’s P/E multiple of 34x, the figure for its peers MSFT, GOOG, and AMZN stands at 35x, 31x, and 119x respectively.

What fundamentals suggest: Want to consider long term investment in Apple? Then pay attention here.

Apple’s recent market move is sharply at odds with its long term stock price trend. The stock has returned nearly 180% for its investors between 2017 and now, with about 80% return this year alone. But fundamentals don’t quite back this long-term growth. Apple’s revenue has increased by 13.5% from $229 Bil in 2017 to $260 Bil in 2019. For the last 12 months, this figure stood at just under $274 Bil, implying an increase of 5% over 2019 numbers. So the company is still growing, but its rate of growth is slowing down, putting lofty valuations in question. There hasn’t been any change in profitability, though, over the years. Apple’s net margins have remained roughly flat between 21% to 22% for the last few years, and the last 12 months are no exception. So you can be confident about Apple’s ability to be profitable, but just need to watch its growth carefully.

What machine learning algorithm suggests: More interested in short term returns? Then you might want to give this perspective more weight.

Our AI engine analyzes past patterns in stock movements to predict near term behavior for a given level of movement in the recent period and suggests a significant 48% probability of Apple falling another 5% over the next 21 trading days. Our detailed dashboard highlights the chances of Apple’s stock rising after a fall and should help you understand near-term return probabilities for different levels of movements.

Taking all 3 perspectives together, Apple might not be the best investment choice right now. But, what if you could invest in a winner portfolio? Here’s a top-quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.


See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share


Name (Required)
Email (Required, but never displayed)
Be the first to comment!