I’ll get right to the point: Apple (AAPL) is a buy right now.
But if you think making an investment in Apple stock here is an investment in the company’s results, think again. Right now, AAPL is an enigma … a bet on how other investors are going to feel about the company anywhere from six months to two years in the future.
That’s not necessarily a bad thing. In fact, there are plenty of instances where AAPL and other stocks benefit by disconnecting from a results-based valuation and moving to a perception-based price.
Investors should always tread lightly when we see sentiment take over, though. It can be a fun ride while it lasts, but the longer the ride lasts, the trickier it is to handicap the trade.
Deja Vu All Over Again
If the way AAPL has been behaving since July of last year seems vaguely familiar, that’s probably because it’s a repeat of the kind of action we saw from Apple stock in 2011 and 2012. That is, the stock soared past its 200-day moving average line (green), peeled back a little to retest key long-term moving average lines, then really took off.
It’s not a perfect clone, but it’s not tough to see some parallels between then and now — the hotter AAPL stock got, the more apt it was to heat up.
It’s also not a stretch to say the current mind-set of “AAPL can do no wrong” was the same one in the driver’s seat in 2011 and 2012, allowing a rally to unfurl that wouldn’t have unfurled for any other company with equivalent circumstances.
Although that bubble was popped in late 2012 and early 2013, we can already see the market’s getting Apple fever all over again. Shares are up 18% since the April 23 earnings release, and are up 41% for the past 12 months.
The gap is oddly irrelevant to everyone.
Just for the record, however, Apple stock nearly doubled in value once it got going in earnest in 2012. We’re not even halfway there yet this time around
Fanning the Flames of Apple Stock
So what’s behind the mania this time around?
It’s not like there are earnings numbers anywhere on the radar for Apple stock, looking forward or backward. The last quarterly report hit the wires on April 23, and the next one will likely be unveiled in late July. Everything we’ve seen of late has been premise-driven, and most of any news wasn’t even from Apple, but rather, about Apple.
There are five key prods for the rekindled euphoria:
- The acquisition of Beats Electronics was an idea floated a few weeks ago, but didn’t become official until Wednesday; apparently Apple wrote the $3 billion check then. While it remains to be seen whether Beats will adequately rekindle sales at the company’s iTunes store, investors are already entertaining thoughts of Apple turning loose of more cash to make acquisitions now that this one is under its belt.
- The debut of the much-ballyhooed iWatch is only targeted as sometime in the fall of 2014, but that’s good enough to stoke investors at this point.
- Thus far, Apple hasn’t appeared to be interested in the so-called “Internet of things.” That might be about to change, though. Within the past few days, the media has (plausibly) thrown the company into the arena, with Apple reportedly announcing software that will allow iPhones to remotely control parts of their homes. No doubt, that pot got stirred in part because Google (GOOG) is doing the same with its acquisition of Nest Labs.
- Mobile payments has only been mentioned by CEO Tim Cook a couple of times, but already the market is prepping for a full-blown product.
- The iPhone 6 is still four months away from being unveiled, but the buzz started months ago and will build up all the way to the event. Nobody loves “new” more than those who follow and trade Apple stock, so it’s plenty conceivable traders are already preemptively filing in before the official launch.
With those main five catalysts on the table, investors should note that Apple’s Worldwide Developer’s Conference (WWDC) will be held next week. Though it’s not clear what the company will be announcing at the event, it its clear that Apple will be announcing something at the event.
That could explain this week’s apparent urgency.
Bottom Line for AAPL
Given the sheer amount of news in the hopper, it’s no surprise Apple stock has done so well of late. Fans and followers have had a smorgasbord of fodder to keep other fans and followers on the hook, even in the absence of specific news. The fact that there’s at least a loosely set schedule of news and unveilings for the next several months only gives the market more to latch onto to justify bidding AAPL higher.
Here’s the thing we all should have learned from the first time we saw it happen in 2011 and 2012:
Don’t fight it.
Right or wrong, logical or not, AAPL is just one of those tickers that can and often does move higher just because it’s moving higher, fueled by little more than sentiment.
Better to make money for the wrong reason than not make money for the right reason.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.