With a roller coaster eight months in the books, Apple Inc. (AAPL) stock is now slowly but surely approaching its 52-week high of $112. Shares of Apple stock are currently trading for just over $108 per share thanks to momentum from its most recent earnings report and optimism about the upcoming iPhone 7 launch.
As Barron’s reported earlier this week, analyst Brian White from Drexel Hamilton has reviewed sales reports from several Apple suppliers, which are commonly cited as indicators of demand for Apple products. According to White, sales from the suppliers showed a stronger-than-expected trend last month, which he has decided means the iPhone 7 will be a hit.
While there may be some truth to this trend, this news item, more than anything, is just further proof that Apple stock — despite being an established technology name — is trading largely on speculation these days. And while I do like some of the fundamental strength that Apple as a company offers, I don’t see any legitimate catalysts pushing Apple stock higher in the near future.
AAPL and the iPhone 7
Any growth or success that could come from the iPhone 7 launch is already being priced into the stock. And while White is optimistic about the launch, not all indicators are equally bullish. RBC Capital Markets, for example, is highlighting the fact that Apple is pressuring its suppliers for price cuts. This would be a good thing if it were as simple as Apple lowering costs to beef up margins, but RBC suggests it’s really an attempt to offset foreign currency headwinds.
The point is that a stellar iPhone launch is far from a sure thing. While it’s undoubtedly a good thing that Apple is being proactive and has pricing power, all the talk of price cuts or supplier sales represent speculation that could be spun in any direction.
This is especially important to point out because Apple stock has been so buoyed by optimism of late despite continued red flags. The applauded earnings report released in July, for example, showed the company’s second straight quarter of falling iPhone sales, an 18% year-over-year drop in revenue and a 23% year-over-year drop in earnings.
Ouch.
It’s important to remember, then, that “better-than-expected” first of all represents hopping over a dramatically lowered bar and second of all seems, at this point, to be very much expected.
Bottom Line for Apple Stock
With that in mind, I truly believe AAPL stock’s previous success is both a blessing and a curse with the iPhone 7 launch right around the corner. It’s tempting to love Apple stock for its value and its solid dividend, but it’s hard to separate the company from conversations and speculation around growth and innovation. The reality, though, is that Apple has become so large, growth from here will be incremental at best.
And yet it’s also so large that the financial media will continue to speculate on every small indicator. This breeds hype that doesn’t match up with Apple stock’s actual potential.
With that in mind, investors should proceed quite cautiously.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
