Since the start of the year, investors have warmed back up to Apple (NASDAQ:AAPL). AAPL stock has climbed by nearly 30% during this time frame.
Although some of its more recent lift may be because of investors cycling back into big tech, as a safe harbor from the banking crisis, rising confidence in the company’s prospects has been the key driver.
Following this rally, the question is whether now is a good time to enter/add to a position, or to sit on the sidelines.
On one hand, Apple is of course not immune to the tech sector headwinds that are still affecting the other FAANG components. This tech giant may have a stronger chance of reporting better results much sooner, and to a greater extent, compared to its rivals.
So, what’s the best move? Let’s dive in and find out.
Why AAPL Stock has Outperformed
Apple shares have outperformed the broad market (as measured by the S&P 500) year-to-date. Not only that, the stock has outperformed most other large-cap tech names, including Microsoft (NASDAQ:MSFT).
Again, improved investor sentiment, not necessarily company-specific news, has been the main reason AAPL stock has been “crushing it” as of late. But that doesn’t mean the current surge in optimism is based on nothing more than wishful thinking. Recently, several sell-side analysts have been laying out a substantive bull case for Apple.
For example, Jeffries analyst Kyle McNealy has argued that channel checks show that demand for iPhones remains robust, despite current economic headwinds.
Other analysts, like Wedbush’s Dan Ives, have also noted demand trends appear promising for the iPhone, particularly in China. Optimism for Apple does not end there.
As Goldman Sachs’ Michael Ng discussed in a recent research note, various factors like secular growth in its Services unit could “more than offset cyclical headwinds.”
This suggests that, like I mentioned above, Apple may have an easier time exiting the current tech downturn than, say, Google parent Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Or does it?
A Near-Term Pullback Is Possible
Analysts seem to be bullish on AAPL stock again, and so does the market. However, before pouncing on shares at current prices, on the expectation that the “trend is your friend,” keep in mind that rising optimism alone doesn’t guarantee a smooth ride back to all-time highs.
The situation with Apple may be much better than previously feared, but the tech slowdown remains likely to weigh on results in the near-term.
The sell-side, after lowering its earnings forecast for the current quarter after the last earnings release, has yet to raise it. If you may recall from the prior quarterly earnings release on Feb. 1, results fell short of expectations.
If results again come up short, it may knock some of the wind out of the latest AAPL rally. That’s not all.
While iPhone demand trends may be promising today, that doesn’t mean further weakness doesn’t lie ahead. A much-feared global recession still hasn’t arrived.
If one takes shape within the year, this could increase uncertainty about Apple’s potential to embark on an earnings rebound starting in the next fiscal year, as implied by current sell-side forecasts. Another pullback is within the realm of possibility.
My Verdict on AAPL
Even as there are a few factors that could temporarily knock AAPL lower in the short-term, conversely, some upcoming developments may give the latest rally some additional runway.
A good example is with this year’s Worldwide Developers Conference (or WWDC), scheduled to take place between June 5 and June 9. At the event, Apple could unveil its much-anticipated augmented reality/virtual reality (or AR/VR) headset product.
That said, it may be best to assume that shares remain vulnerable to a pullback. While performing better than other FAANG components, sector-specific issues are not yet in the past and could again weigh on sentiment.
Still, if your time horizon extends beyond the here and now, and you are bullish on its long-term catalysts, take a bite out of AAPL stock at current prices.
AAPL stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in GOOG and MSFT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.