It’s unofficially the start of the holiday shopping season, which spells big-time bargains for consumers and potentially massive profits for companies. But for today’s investors, waiting for a discount to hit in Apple (NASDAQ:AAPL) stock before making a purchase makes very good sense. Let me explain.
From Apple+, the iPhone 11, the Apple Watch Series 5 and other toys or goodies, there’s sure to be stocking stuffers and gifts under the tree with Apple’s name on it. It sounds like a great time to invest in AAPL stock, right? What’s that, you need more? In that case, look no further than one of Wall Street’s three or maybe fourth wise men for guidance.
Investment firm Morgan Stanley was heard singing seasonal praise for AAPL stock just this past week. The long-standing and respected banker was on CNBC last Wednesday offering holiday cheer with a price hike on Apple shares to $296.
Behind the target lift and 11% premium for the AAPL stock price, analyst Katy Huberty cited continued buybacks and Apple’s Services business growing smartly as two supports for a rally. And back to the holiday selling season, an anticipated demand refresh for the iPhone, as well as impressive Apple margins despite the U.S. China trade war were determined to bode well for the company’s shares. But Huberty wasn’t done either.
The Morgan analyst went on to note the top 100 institutional holders of AAPL stock maintain positions less than the company’s weighting within the S&P 500. And in Huberty’s estimation, that’s bullish. The “under-owned” logic is if you can’t beat them, join them. And the fact is many pros simply look to mirror the market. In turn, there could be natural buyers for AAPL. Maybe though, we need to give some of these other quieter and wise operators some credit for waiting on a potential future sale?
Apple Stock Weekly Chart
At the tail-end of September I wrote a bullish article on why AAPL stock was a purchase. If timing is everything, the argument worked in spades. Shares never looked back. Apple has gone on to fresh all-time highs while returning an additional 20% to investors. That also brings AAPL’s year-to-date performance to 68%.
AAPL stock’s returns this year are even more impressive relative to its peers. Microsoft (NASDAQ:MSFT), the world’s second-largest company and fellow Dow constituent is up “just” 48%. Both are also the Dow’s strongest gainers by a wide margin. Obviously, the trend in Apple has been friendly for investors. But Apple stock’s generous gift of giving in 2019 now looks prone to some early seasonal returns of another variety, i.e., profit-taking.
Ultimately, I’m agreeable with Morgan’s price target. It happens to line up nicely with some Fibonacci-based resistance levels and near the psychologically pleasing $300 level in AAPL stock. But the weekly chart sums up our short-term concern with buying into AAPL stock on momentum in today’s market.
After eight straight weeks of rallying up a wall of worry and outside its upper Bollinger Band, the past five days of trading produced a topping candle in Apple shares. It’s enough to have me on guard. Further, with a bearish stochastics crossover and indicator turning lower in overbought territory, it’s not time to look a gift horse in the mouth. Taking profits or simply waiting for a more supportive pullback style entry makes ample sense in Apple right now.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
