Will the Third Time Be a Charm for Apple?

Recent upgrades make a strong case for AAPL stock to move past its 52-week high 

After not doing much of anything for most of the year, Apple (NASDAQ:AAPL) stock has made a strong move in the last two months of the year. As recently as October 13, 2021, AAPL stock was a market laggard being up just 6% for the year. However, since then the stock has been on a tear and is now up 32% in 2021 on the last trading day before markets close for the Christmas holiday.  

And twice in the last month, Apple has reached its 52-week high and pulled back both times. This leaves us with the question of whether the third time will be a charm for APPL stock? We believe there could be for a few reasons that we’ll outline below. 

Analysts Remain Bullish 

Apple last reported earnings on October 27. The results were disappointing as the company met EPS expectations and revenue was lower than expectations. However, according to MarketBeat data on Apple, analysts were undeterred. Right now, the consensus price target is largely being held down by two bearish analyst outlooks. Otherwise, most analysts have a price target far above the stock’s current price.  

Holiday Sales Will Be Strong 

The key reason for the mostly bullish sentiment is that analysts believe, as does Apple’s management, that softness in sales is a supply chain issue not a question of demand. This view recently got support from Morgan Stanley (NYSE:MS) analyst Katy Huberty who noted that it appears that lead times for iPhone delivery are falling to “more normalized levels.” And if that narrative is correct, then there’s no reason not to believe that Apple will have a strong holiday sales season. 

Not surprisingly, Huberty is one of six analysts to give Apple a price target of at least $200.  

Apple is Positioning Itself in the Metaverse 

In recent years, growth in its Services and Wearables divisions has breathed new life into AAPL stock. Many investors were becoming concerned that Apple was too dependent on its signature iPhone. Those fears have been allayed to a great extent. In fact, revenue from the Services division is only eclipsed by the company’s iPhone revenue.  

However, technology is always changing. And the metaverse is the latest threat to Apple’s dominance. Of course, Apple is not ignoring the threat. The company is planning to release its own virtual reality goggles in 2023. The market for augmented reality (AR)/virtual reality (VR) goggles is estimated to reach up to 50 million units.  

At the present time, industry analysts are expecting the headset to integrate both AR and VR functions in one device. According to Ming-Chi Kuo, an analyst from TF International Securities, the headset is likely to feature a high-end chip and may feature a high-resolution display. It’s also expected to have a price tag of $1,000 which compares with its highest end iPhones today. 

Kuo also estimates that when Apple launches the headset there will be strong demand. And, like the iPhone the company is already forecasting a second generation of the device to launch in 2024. If the iPhone is any indication, the company will probably meet its projection of shipping 10 million of the second-generation headsets in the back half of 2024. That would potentially give Apple a 20% market share in a market that’s projected to grow 43% through 2030.  

Expect AAPL Stock to Reach New Heights 

The sell-off in APPL stock after its earnings report seemed overdone. Over the last five years, investors who bought Apple on the dip have been rewarded. With the company likely to post strong earnings early in 2022. Now, is a time for opportunistic investors to look for any pullback as a reason to add to their position in this tech leader.