The market really doesn’t know what to do with Apple (AAPL) stock these days, and that’s just another good reason to buy. After all, AAPL may be up a market-crushing 15% for the year-to-date, but the Apple stock price hasn’t moved in months.
Indeed, as welcome as Apple stock’s YTD price performance has been — the S&P 500 is up less than 2% on a price basis — it hasn’t done anything for anyone lately. AAPL peaked back in February and has been essentially treading water ever since.
From earnings reports to positive channel checks to a developers conference, one potential catalyst after another for Apple stock has just fizzled out. The news flow has been fine, and yet AAPL stock remains anchored around $126-and-change.
Even some positive Wednesday commentary from analysts on iPhone demand couldn’t give Apple stock a boost. The market and Street are always wringing their hands about the state of iPhone sales. Fair enough; iPhones are far and away Apple’s most important product.
But the latest news from a couple of different sources was encouraging to no positive effect. Based on channel checks, analysts at Bank of America-Merrill Lynch hiked their quarterly iPhone shipment estimates to 50 million units from 46 million units (a 9% increase). Furthermore, the analysts raised their fiscal year 2015 and 2016 estimates.
AAPL Stock Shrugs Off Good News
Even Andy Hargreaves, an analyst with Pacific Crest who’s worried about Apple’s latest iPhone refresh, has mostly positive things to say in a new note to clients:
“Although it is early and we lack visibility into the critical December quarter, our initial estimates of iPhone component orders in FQ4 suggest Apple is anticipating demand in the next iPhone cycle that is ahead of our current expectations. A meaningful decline in F2016 iPhone unit sales has been our largest concern, so the slightly higher-than-expected initial order volume reduces risk to the shares, in our view.”
And yet Apple stock did nothing with the news, trading fractionally lower throughout the morning session.
That’s not to say the market is without legitimate concerns. As Hargreaves mentioned, “after strong initial demand, follow-on interest in Apple Watch appears mediocre.” The iPad segment is also in decline.
While the Apple Watch has the potential to be a major blunder and embarrassment for Apple, we’re not there yet. For now, Apple and AAPL stock live and breathe on iPhone demand — and by all accounts it looks healthy.
If past is prologue, we’ll get more positive channel checks and upward revisions to iPhone estimates as we get closer to Apple’s quarterly release date, about a month away. With that optimism mounting — and the likelihood of an Apple earnings beat — AAPL stock won’t stay under wraps for much longer.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
