If you simply look at the technical chart for Apple (NASDAQ:AAPL), you’d assume that nothing can keep the consumer technology giant down indefinitely. Despite the early salvos of the novel coronavirus causing the company to temporarily shut its retail doors, demand for its products along with recent state reopening measures have boosted Apple stock. Now, the question is, can this momentum last for the second half of the year?
If you had asked the question a few weeks ago, you’d probably get a strong yes. However, the resurgent coronavirus is throwing a big monkey wrench into this optimistic narrative. For several days, the U.S. has seen fresh records in new daily infections. On July 2, our nation breached the 55,000 mark, a dubious record if there ever was one.
Of course, this has huge implications for Apple stock because of its exposure to consumer sentiment. Further, the company itself isn’t exactly doing any favors for stakeholders or prospective buyers for that matter. Apple announced that it’s closing 77 stores across 11 different states, a staggering figure considering that it only recently began opening back up for business.
The states that are on the chopping block are Alabama, California, Florida, Georgia, Idaho, Louisiana, Nevada, Oklahoma, Mississippi, Texas, and Utah.
As if that wasn’t enough, another worrisome headwind for AAPL stock is the economy. That might sound like a strange concern, considering that the labor market added 4.8 million jobs in June, dropping the overall unemployment rate to 11.1% from April’s peak of 14.7%.
However, the timeframe doesn’t include the recent uptick in Covid-19 cases. Thus, we could suffer a hard stop to the positivity.
Why You May Not Want to Give up on Apple Stock
I’d rather not get bogged down on a lengthy discussion about whether you should buy or sell AAPL stock. But if you’re thinking about panicking on Apple because of this second wave of store closures, I wouldn’t go overboard. As the data stands – although it could get worse depending on how this plays out – there’s not enough evidence to justify changing your outlook.
Here, the mainstream media doesn’t really provide a great public service. Although both the record number of coronavirus cases and the store closures sound deeply troubling, you must have perspective. First, U.S. total infections is around 2.8 million, which is not extremely significant percentage-wise.
Second, the store closures impact over 28% of Apple’s U.S. store count. Obviously, that’s more significant. However, even if case numbers increased, consumers will still be able to get their Apple-branded products. In other words, the Covid-19 outbreak doesn’t have the same effect to AAPL as it would a travel-based company like American Airlines (NASDAQ:AAL) or Carnival (NYSE:CCL).
But my biggest counterargument against excessive coronavirus-fueled fears against AAPL stock is this: the hype over store-closure-impacted states is overdone.
When you look at total cases per one million people (i.e. a per-capita comparison) in the 11 impacted states, you’ll find that most of them are no more than 12% of the U.S. average case count per million, or 7,390.
Even more interesting is that California and Texas, which have the most closed stores at 15 and 10, respectively, have one of the fewest cases per million. In the Golden State, it’s 6,270 while in Texas, it’s 6,313.
These are stats from July 2, which means they could get worse. However, bear in mind that New York has the highest per million count at 21,571.
Not Completely in the Clear
While I don’t recommend panicking on Apple stock because of the store closures, I’m not thrilled at the prospect of buying shares right now. Conspicuously, shares are still near overbought levels. With the backdrop of a pandemic and a still-struggling economy, I’d like to see a dip before committing to a position.
Speaking of the economy, that’s my other major concern. For the final week of June, nearly 1.43 million people filed initial jobless claims. Not only was that up above the consensus target of 1.38 million, we’ve now witnessed 15 straight weeks of initial claims above one million.
You can look at the data yourself. At no point since the government kept records has requests for unemployment benefits hit one million in a single week.
One of the explanations why the jobless claims are so high is that they reflect a backlog from prior requests. That’s likely true. However, I don’t think it explains all the claims. And this tells me that employers are still laying workers off, which is not good for AAPL stock.
Ultimately, I’m going to take the conservative – financially, not politically – approach here. There are too many variables and frankly, too much that can go wrong for anyone to comfortably recommend AAPL at these elevated prices.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
