Apple Stock Price Rises 13% in 2021– Time to Buy AAPL Stock?

Apple (AAPL) stock has gained 13.1% so far in 2021 and is the third best performing FAANG stock this year behind top performers Alphabet and Facebook. The stock recently hit an all-time high.

Apple is the largest company by market cap and is also the biggest holding for Berkshire Hathaway whose chairman Warren Buffett is known for his value investing principles. What’s the forecast for AAPL stock in 2021 and should buy the iPhone maker?

Apple stock technical analysis

AAPL stock looks mixed on the charts. It trades above the long-term SMAs (simple moving average) including the 50-day, 100-day, and 200-day. However, it has fallen below the 10-day, 20-day, and 30-day SMA. The MACD gives a sell signal while the 14-day RSI (relative strength index) of 51.7 is a neutral indicator. The stock has strong support at the 200-day SMA.

67% of all retail investor accounts lose money when trading CFDs with this provider

Recent developments

Last month, Apple had reported its fiscal third-quarter earnings which were ahead of what analysts were expecting. The company posted revenues of $81.4 billion in the quarter which were up 36% as compared to the corresponding quarter. It was a record revenue performance for the company in the June quarter. Apple’s Services revenues also jumped to a record high of $17.5 billion. Services revenues rose almost 36 percent as compared to the last year. The company posted an EPS of $1.30 in the quarter.

“Our record June quarter operating performance included new revenue records in each of our geographic segments, double-digit growth in each of our product categories, and a new all-time high for our installed base of active devices,” said Luca Maestri, Apple’s CFO.

The company generated operating cash flows of $21 billion in the quarter and returned $29 billion to shareholders in the form of dividends and buybacks. In the absence of compelling investment opportunities, Apple has been repurchasing a massive amount of its shares. Even Buffett has previously supported the company’s buybacks.

AAPL guidance

Meanwhile, despite posting better than expected earnings, Apple stock had fallen after the release. The company warned of supply disruptions amid the global chip shortage that took a toll on the sentiments.

Apple stock forecast

Of the 42 analysts covering Apple stock, 31 rate the stock as a buy while eight rate them as a hold. The remaining three analysts have a sell rating. AAPL has a median target price of $166.50 which is a 14% premium over current prices. Several analysts have taken a bullish view of Apple stock since the earnings release. Today, JPMorgan raised its target price on Apple to $180 while reiterating its overweight rating.

“We are increasing our CY22 iPhone volume estimates further (to 246 mn units), and see substantial upside still relative to consensus expectation, which admittedly has been increasing over the past few months following stronger iPhone 12 volumes,” said analyst Samik Chatterjee in his note. Yesterday, Morgan Stanley had also maintained its overweight rating on Apple stock.

AAPL analyst price action

“The iPhone 12 and iPhone 12 Pro Max continue to be the 2 most popular models of the iPhone 12 family in China, however iPhone 11 models have also remained resilient, as 21.4% of Apple’s iPhone installed base in China is made up of 1 year old models, vs. just 18.2% at this point last year,” said Morgan Stanley in its note. It added, “We believe these data points support our view that the iPhone can see continued shipment strength after the launch of the new iPhone 13 model in September/October.”

Gene Munster

Gene Munster, who had correctly predicted Apple’s market cap hitting $2 trillion had predicted last year that the company’s market cap would hit $3 trillion. While he had forecast that the stock would be the best performing FAANG name in 2021, that hasn’t been the case. That said, Apple looks like one of the compelling long-term buys.

Apple stock trades at an NTM (next-12 months) PE of 26.6x. The multiples have come down from last year’s highs even as they are higher than the historical averages. That said, AAPL has seen a valuation rerating amid the pivot towards high margin services business. Markets value the stock as a software company and not as an equipment company. Software companies tend to attract a higher valuation as compared to hardware companies.

Apple stock long term forecast

The long-term forecast for Apple stock looks positive. We’re in an iPhone supercycle amid the 5G transition which bodes well for AAPL. The increased pace of digitization should also benefit Apple. Over the long term, Apple plans to get into electric cars and autonomous vehicles which can add shareholder value. Electric vehicle companies attract exorbitant valuations and many see Apple’s entry into the industry as a major challenge for Tesla.

The total addressable market for mobility is much above the gadget market that Apple is currently targeting. If Apple can come up with a compelling product proposition in the mobility market, just like its iPhones, it could take the stock much higher in the long term.

Overall, Apple can be a part of the core portfolio for long-term investors. Even Warren Buffett is a fan of the company and regrets selling some of the Apple shares over the last year.

67% of all retail investor accounts lose money when trading CFDs with this provider