U.S. equities are rebounding on Monday, including a much-needed rally for Apple Inc. (NASDAQ:AAPL). Apple stock has been on an extended slump since its quarterly earnings report. AAPL’s results were better than low expectations, but not good enough to convince investors to stick around.
However, AAPL stock is getting a bid today after the surprise over-the-weekend announcement that the FBI has already wrapped up its review of new emails related to Democratic presidential candidate Hillary Clinton’s private server.
Markets interpreted this as bolstering Hillary’s chances. That’s seen as a positive for risky assets like equities since she is widely viewed as the “status quo” candidate vs. GOP challenger Donald Trump.
A big beneficiary has been the mega-cap tech stocks that got slammed lower last week, including Alphabet Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB). Chief among them is Apple stock — probably the most important equity on Wall Street.
AAPL dropped more than 8.3% from its Oct. 25 high into its intraday low on Friday. While shares are up 1.4% today, the short-term downtrend remains in effect.
If the bulls are serious, we need to see a rebound back above the 50-day moving average near $112 — a roughly 2% move from here.
An Apple Stock Comeback Is Unlikely
Can AAPL stock really pull off something meaningful?
Possibly, at least in the short-term — especially if Clinton locks up a victory tomorrow on Election Day.
However, the fundamental outlook for Apple stock remains challenging over the horizon amid saturation in the smartphone market. Research by KGI’s Ming-Chi Kuo shows demand for the iPhone 7 is tepid, resulting in the second consecutive year of falling sales for the iPhone. Not only are consumers not super excited about the incremental updates in the new phone — and the oft-derided decision to remove the headphone jack — but demand has been strong for the smaller, cheaper iPhone SE.
This dynamic was also seen after the release of the cheaper, smaller iPad Mini, which ended up dragging down overall iPad average selling prices and profit margins.
Kuo believes Apple will avoid releasing an update iPhone SE in early 2017 to avoid this. But the result could merely be people trading off to competing products.
The slow burning of disappointment in Apple stock should continue until the iPhone 8, or whatever it’ll be called, is released in late 2017.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
