If you are wondering if now is the time to buy Apple NASDAQ: AAPL, the best answer is maybe. Maybe it’s a good time to buy the worlds leading consumer products manufacturer, maybe it’s time to invest in this company’s robust cash pile and safe dividend, but maybe it's time to sit on the sideline too.
The stock is down more than 30% from its split-adjusted all-time high, and the charts are not looking very good. This market is trading below a key technical support level with falling indicators and diminishing analysts' sentiment, so it could keep falling. In that scenario, shares of Apple could fall below $120 and possibly as low as $100 before they hit bottom.
The Analysts Are Putting Pressure On Apple
There are 32 analysts tracking Apple, making their activity more important. At 32, this community represents 10s of billions of investment dollars, and their sentiment is slipping. The Marketbeat.com consensus rating is still a Moderate Buy, and the price target, even the low end, is implying some upside for the stock, so it is a buy, the question is when and now does not look like the time.
The trend in analysts' sentiment is decidedly downward. It has the rating down in the 12, 3 and 1-month comparisons, while the consensus price target is down in the 3 and the 1-month comparisons, so investors should expect to see price action remains under pressure in the near term. That pressure won’t ease until the analysts begin warming up again, and that may not be until later in the year.
Why are the analysts cutting their ratings and lowering their targets? Because of economic woe and the impact of that on Apple’s demand. The reopening of China is good news and has production at Foxconn up to 90% (probably better than that by now), but at least two clouds are hanging over the stock that promises to bring rain later in the year.
The first is the estimates for iPhone 14 shipments. The trend in consensus for this figure is also down, and it will have a tremendous impact on top-line expectations. The 2nd is a report the company cut its orders for MacBooks, Apple Watches and AirPods. These are not the company’s top sellers but, along with the iPhone outlook, are evidence of slowing demand on a company-wide basis
Apple will next report earnings at the end of this month, and the outlook is not inspiring. The analysts expect to see revenue near $123 billion, which is down slightly on a YOY basis, and actual results could easily disappoint the market.
The EPS outlook is even worse, with the GAAP $1.99 down 5% YOY. The caveat is that Apple tends to beat expectations but don’t expect a small amount of outperformance to spark a rally. The guidance for the remainder of the year will drive the market, and, as things stand, the outlook is still deteriorating for the broad economy in general and this stock in particular.
Institutional Activity Is No Support For Apple
Apple’s institutional activity may not provide support for the stock price either. The institutions are not bearish, but neither are they outright bullish, and holdings are only about 57% of the company. At best, investors should expect the rotation to continue in this name as old investors take money off the table and new ones put money to work.
Turning to the chart, the price action in Apple is rebounding from the fresh low but not as strong as a bull might like to see. The price action is still below resistance at the $130 level and the midpoint of the previous candle, which is a strong, red candle.
Assuming the market follows through on the signals it is giving, this stock will probably move lower before it moves higher, and the bottom may not yet be in sight. This is also bad news for Skyworks, Broadcom, and other stocks relying on Apple for income.
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