A decade into the current economic expansion, a handful of high- flying tech stocks have kept the major American stock-market indexes at or near all-time highs for quite a while. Representative of this market’s incredible momentum and resilience is Apple (NASDAQ:AAPL) stock, which remains loved by most investors and financial commentators alike.
The contrarian in me, however, bristles at the thought of buying something that everyone loves. It’s important to pay attention to what analysts are saying about a company, but at the end of the day, investors have to apply their own judgment and common sense. To that end, I will take a skeptical look at AAPL stock, the analysts’ darling that might have flown a little too high.
AAPL Stock Gets Two Analysts’ Stamp of Approval
When analysts from prominent financial firms raise their price targets on a stock, investors sit up, take notice, and often bid up the share price. Analysts’ projections are also important because they can be fairly accurate gauges of the market’s sentiment towards a particular asset or even an entire sector.
In the case of Apple stock, two analysts from highly respected financial firms have raised their targets and reiterated optimistic ratings. Specifically, RBC Capital Markets’ Robert Muller maintained his “outperform” rating on AAPL stock and raised his price target on AAPL to $330 from $295, while Bank of America’s Wamsi Mohan reiterated his “buy” rating and lifted his price objective on the shares to $330 from $290.
I tend to view these target hikes as typical analyst behavior: their ongoing thesis is that. because a stock’s price has gone up a lot, it will therefore continue to go up a lot. That might sound like an oversimplification of their position, but it’s hard to deny that analysts, in general, have a persistently non-contrarian bent.
Seeing Beyond the “Buzz”
Still, if the experts have compelling reasons for their ambitious price objectives, I’m willing to listen. The justification of Bank of America’s Mohan sounds like a broken record to me, though, as he cites the growth of demand for iPhones and App store revenue increases as the reasons for his target boost. Given that the AAPL stock price has literally doubled in the past year, I feel that iPhone and App store sales would have to increase substantially to justify the current share price, not to mention Mohan’s higher price target.
RBC’s Muller also deploys the same-old-same-old bullish talking points for Apple, but he adds a new and odd angle: social-media sentiment, of all things. Evidently, Muller sees a flurry of social-media buzz surrounding the iPhone 11 as equivalent to “high and sustained customer interest.”
Now, call me a jaded cynic, but I’m knee-deep in social media on a daily basis (much to my family’s exasperation) and I view all social-media “buzz” as fabricated, unreliable, and useless. Apple-cult fanboys will come out in droves on Twitter (NYSE:TWTR) and Instagram and gush about any new Apple-product release before they actually try out the product for themselves.
Besides, it’s well-established that large companies have the resources to make social media advertisements look like unpaid comments to the casual observer. As an example, look at the most recent Star Wars film: prominent Twitter influencers (you know, the ones with blue check marks by their name) tweeted tremendously positive reviews about it while the general tweeting public roundly panned the movie.
I’m not explicitly going to accuse Apple of engaging in this practice, but I’ll let you connect the dots. At the very least, we can question the value of social-media “buzz” as a useful analytical tool; Muller should know better than that, but he’s probably not knee-deep in the Twitter trenches on a day-to-day basis like some of us are (present company included).
The Takeaway on AAPL Stock
My purpose isn’t to malign Apple or its fanboys; the last thing I need right now is to have the Tim Cook army standing at my doorstep. I’m also not trying to discredit the analyst community, which undoubtedly serves a purpose. But if their purpose is to get me to recommend AAPL stock at this price, I’m just not going along with that, even if it makes me a “buzz kill.”
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
