While the stock market has experienced some roughness lately, Apple Inc. (NASDAQ:AAPL) stock has largely bucked that trend. AAPL stock is up more than 22% year-to-date against the S&P 500 which is up less than 5%.
AAPL stock had a big first-quarter catalyst at the end of January which underscored growth in the company’s important Services segment, but more than ever, investors are flocking to Apple Inc. because they view it as safe. Apple is a household name with a bunch of institutional support, lots of cash on the balance sheet, tons of cash flow, a much-hyped iPhone set to launch later this year and promising new business growth.
It’s hard not to be attracted to AAPL stock in that lighting.
But Apple is stretched now, and there are major risks to the current rally. I think it’s time to exercise caution, and here’s why.
Why Apple Stock Could Head Lower
Everyone is getting excited about the iPhone 8 super-cycle, and analysts are telling investors to buy the stock. But there are some serious risks to the super-cycle living up to the hype.
The iPhone 7 benefited from Samsung’s exploding phone debacle. With the Galaxy Note 7 exploding, getting banned and being recalled, the iPhone 7 was the obvious smartphone upgrade during the holiday season in 2016. That significantly helped Apple Inc. set a quarterly record for iPhone sales in the first quarter of 2017.
But that “lack of competition” tailwind won’t continue. Samsung (OTCMKTS:SSNLF) just unveiled its Galaxy S8 and S8 Plus, and response has been better than expected, according to the chief of Samsung’s mobile division.
In other words, early reads on Galaxy S8 sales are that the exploding Note 7 debacle isn’t having much of a dent on Samsung’s brand. If that continues to be the case, the Galaxy S8 could sell quite well and SSNLF could take back smartphone market share. With so much hype built into the iPhone 8 super-cycle, a Galaxy S8 success story is a serious risk to AAPL stock.