Apple (NASDAQ:AAPL) Scores Two More Bulls

Apple’s Rebound Has Legs

As great as Apple’s (NASDAQ:AAPL) year has been it was not a year without blemish. The company was not the first to be affected by the pandemic but it was the first and most-high-profile company to take a hit. The store closures and production hiccups shaved about 10% off of early-year estimates and slowed an already slow-start with 5G. The company overcame those issues but share prices hit another stumbling block in the form of a stock split that has had the stock trading in a range ever since. But that is about to change.

What investors need to understand is that the analysts have been getting more and more bullish on this stock and there are still plenty of them sitting on the fence to help drive share prices higher. At last count, there were 41 ratings on this stock with more than half bullish leaving 14 hold or neutral. In my view, a neutral rating implies ownership or at least the intent to buy. With Apple what it is, and the outlook brightening, investors should expect some of these neutral ratings to turn bullish as the Q4 reporting season draws near.

And there were two more ratings added on Monday. Both the Royal Bank of Canada and UBS Group came out with ratings that amount to a Buy for investors today. The Royal Bank of Canada initiated an outright Buy and a price target inline with recent price action while UBS Group initiated at Neutral. The UBS Group price target implies prices will dip and that investors should wait to buy.

The Consensus Target For Apple Is Too Low

The consensus estimate price target for Apple is near $118 and represents about 11% downside with shares trading near $132. What the consensus doesn’t reflect is the uptrend in price-target that suggests a target near $145 or 10% upside is more accurate. The high price target of $160 is held by Wedbush and was set early in December.

Analyst Daniel Ives went so far as to set a $200 bull-case scenario (50% upside) citing developing trends in the 5G market. According to his research, pre-orders of the new iPhone 12 are more than double its predecessor and on track to deliver results well above the consensus. Don’t forget, Nikkei reported an expected 30% production increase for Apple based on preorders of components. If all this is true, the consensus price target for shares of Apple is far too low.

Apple EV Takes On Tesla, Not Exactly

Apple made waves in early December when it revealed it was working on an electric/self-driving vehicle. The move was met with skepticism by some analysts but don’t think Apple is trying to compete with anybody. The EV market represents only 3% of a multi-trillion-dollar industry that is expected to grow at a 35% to 45% CAGR for several decades. Apple doesn’t have to compete directly with any other EV manufacturer to snag a piece of this growth story. And then there is the tech. Despite Apple’s intent to manufacture a car of its own, it is the tech that is most valuable. An Apple suite of self-driving/EV car applications would be worth billions to the industry. In the end, it is more likely that Apple will partner with a manufacturer like Tesla, GM, or Nio.

Apple Is A Dividend Growth Stock

Investors should not forget that Apple is a dividend growth stock with a fortress balance sheet. The company only pays about 0.60% in yield but that is compounded by the long-term growth trajectory of the stock. And there is the dividend growth outlook to consider as well. The company has been increasing for 9 years with a 10th increase due out in mid-2021. The payout ratio is very low at 20% so no worries in that regard. The balance sheet shows an enviable $90 billion in cash, more than enough to sustain operations, as well as low debt, high debt coverage, low leverage, and ample free-cash-flow. There is no reason not to expect another distribution increase.

The Technical Outlook: Apple Is On The Verge Of Breaking Out

Shares of Apple are moving higher in early trading and on the verge of a major break out. The rising tide of analyst sentiment is supporting price action and has the stock trading just below the post-split all-time high. The move upward is in-line with the long-term trend as well and is supported by the indicators. Both stochastic and MACD are firing bullish signals that point to underlying strength and at least a solid test of the all-time high if not new all-time highs in the weeks ahead. The catalyst for the move could come in the form of earnings or earnings outlook. Apple is scheduled to report calendar Q4 results at the end of January 2021.