Apple stock price rises 13% in 2021 – Time to buy AAPL stock?

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

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

Technical analysis of Apple stocks

AAPL stock looks mixed on the charts. It trades above the long term SMA (simple moving average) comprising the 50 days, 100 days and 200 days. However, it fell below the 10-, 20-, and 30-day SMAs. The MACD is giving a sell signal while the 14-day RSI (Relative Strength Index) of 51.7 is a neutral indicator. The stock is enjoying strong support at the 200-day SMA.

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RECENT DEVELOPMENTS

Last month, Apple released its fiscal third quarter results that were better than analysts expected. The company posted revenue of $81.4 billion in the quarter, up 36% from the corresponding quarter. This is a record revenue for the company in the June quarter. Apple’s services revenue also hit a record high of $17.5 billion. Service revenue grew nearly 36% year over year. The company posted EPS of $1.30 in the quarter.

“Our record operating performance for the June quarter 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 flow of $21 billion in the quarter and returned $29 billion to shareholders in the form of dividends and buybacks. In the absence of attractive investment opportunities, Apple bought back a massive amount of its shares. Even Buffett has backed corporate takeovers before.

AAPL Guidelines

Meanwhile, despite posting better-than-expected earnings, Apple stock fell after the release. The company warned of supply disruptions amid global chip shortages that weighed on sentiment.

Apple Stock Forecast

Of the 42 analysts covering Apple shares, 31 rate the stock as a buy while eight rate it as a hold. The other three analysts have a sell rating. AAPL has a median target price of $166.50, a 14% premium to current prices. Several analysts have taken a bullish view of Apple’s stock since the earnings release. Today, JP Morgan raised its price target on Apple to $180 while reiterating its overweight rating.

“We are further increasing our CY22 iPhone volume estimates (to 246 million units) and seeing a substantial upside from consensus expectations, which have admittedly increased in recent months on stronger iPhone 12 volumes. “said analyst Samik Chatterjee in his note. Yesterday, Morgan Stanley also maintained its overweight rating on Apple stock.

AAPL Analyst Price Action

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

Gene Munster

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

Apple shares are trading at an NTM PE (next 12 months) of 26.6x. Multiples have fallen from last year’s highs, although they are above historical averages. That said, AAPL has seen a reassessment amid the pivot to high-margin services businesses. Markets value the stock as a software company, not as an equipment company. Software companies tend to attract a higher valuation than hardware companies.

Long-term forecast for Apple stock

Long-term forecasts for Apple shares look positive. We’re in an iPhone supercycle in the middle of the 5G transition, which bodes well for AAPL. The accelerated pace of digitization should also benefit Apple. In the long term, Apple plans to move into electric cars and self-driving vehicles that can add shareholder value. Electric vehicle companies are attracting exorbitant valuations and many see Apple’s entry into the industry as a major challenge for You’re here.

The total addressable mobility market is far larger than the gadget market that Apple is currently targeting. If Apple can deliver a compelling product proposition in the mobility market, just like its iPhones, it could drive the stock much higher in the long run.

Overall, Apple can be part of the core portfolio for long-term investors. Even Warren Buffett is a fan of the company and regrets selling some of Apple’s stock in the past year.

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About Mohit PRO INVESTOR

Mohit Oberoi is a freelance financial writer based in India. He completed his MBA with a specialization in finance and is also a CFA charter holder. He has over 14 years of experience in the financial markets. He has written extensively on global markets over the past seven years and has written over 7,500 articles. It covers metals, electric vehicles, asset managers, tech stocks and other macro news. He also enjoys writing about personal finance and valuation-related topics.

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