Apple (NASDAQ:AAPL) is a solid long-term investment. But with the likelihood that the company will be facing revenue disruption, it’s hard to look at the stock as being properly valued. A recent article in Seeking Alpha illustrates why Apple stock is likely overvalued.
As of this writing, Apple has closed 32 of its Apple stores in the states that have been showing the highest new confirmed cases of the novel coronavirus. This is the right thing to do, and it’s a very on-brand thing for Apple to do.
Having to close some stores, even out of “an abundance of caution” as the company says, is a blow. How much remains to be seen.
At the onset of the pandemic, AAPL stock was portrayed, for better or worse, as the poster child for the pandemic. Shares lurched sharply, and uncomfortably, lower on concerns that the company would not be able to release its new iPhone (iPhone 12) at the end of the year. And with a supply chain that is deeply rooted in China, the epicenter of the pandemic, those concerns were not completely unfounded.
But Apple put those concerns to rest and after delivering a solid earnings report, it looked like the worst was behind it. Having to shut down stores, even temporarily, puts Apple once again front and center in a pandemic it did nothing to cause.
It’s Hard to Ignore AAPL Stock’s Long-Term Outlook
Apple gives investors many reasons to look at as a solid long-term investment. The first remains the popularity of its iPhone. The company is still committed to launching its first 5G iPhone this fall that is being called a potential “supercycle” event.
But betting on 5G is too easy. I look at the company’s sales of their iPhone 11 that featured, well, an improved camera. Now, I’m not denying that in our current selfie culture, a better camera is a big deal. But was it really enough to purchase a new phone with 5G on the horizon?
It might be if you get a year of Apple TV+ with your purchase. And that brings me to the company’s second catalyst, its Services division, which continues to grow.
This is an example of where the virus actually helped Apple. The company launched Apple TV+, its entry in the streaming wars, in 2019 and the launch went well, but there were skeptics who wondered how Apple would compete with a small content library.
Well, as it turns out, having a captive audience for weeks on end helped just a little bit. However, it remains to be seen how much revenue Apple will get from this.
The company also is getting increased demand for its wearables. In fact, the company was seeing increased sales of its Apple Watch to the frontline workers in the medical field as they were fighting Covid-19.
The Only Wrong Decision Is to Sell AAPL Stock
It’s unusual for me to have a cautious take on Apple stock. And to be clear, I still love the long-term outlook for the company. The company’s iPhone is still wildly popular and the company has become about so much more than its iconic phone.
But the company may have to close additional stores, and there’s no clear indication of when the stores that are closed will reopen. Investors have that to consider.
Plus, Apple has an earnings report coming up at the beginning of August. It might be time to hit the pause on AAPL stock and wait for a better entry point.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
