Apple has been a leader in the market recovery with its share bouncing back more than 50% from the March lows. Apple shares are up by 10% for the year. In February, just before the pandemic, Apple shares touched an all-time high of $327. As on Tuesday, after short holidays, the S&P 500 is up only by 2% whereas the rest of the trading day was flat for most of the shares.
However, Apple is only 2% less to touch its all-time high. The index is 11% below its all-time high. Apple is considered to serve an important role in the market. Not only it is one of the largest public companies but it also serves an important role from a psychological perspective. If Apple stock performance psychological perspective is considered, one can safely guess that the yesterday’s growth could have wide-reaching implications.
If we look at the chart, we can see the performance of Apple in recent days. It is observable that how strong this stock has been. Analysts conclude that the Apple stock is way above its 20-day moving average as buyers are ready to grab its share whenever there’s a dip. This can be seen in the earlier days of May 2020. Apple shares rallied up to $320 before dipping again. The shares again bounced back off the $300 level and with 78% retracement.
While shares may retreat from Tuesday’s high, it would be encouraging to see if Apple could hold $310 to $320 as support. Having the price range as a support would be encouraging since it has been a resistance over the past few weeks. A breakout above the price of $320 mark could trigger a significant higher move. Although Apple shares to break the support of $300 has a low probability, even if it does so, the share may trade much lower by end of the day. Until then the Apple shares will be bought by many at even the slightest dip.
Although the bullish trend of Apple Shares seems promising, the question remains the same. Can the stock hold the bullish trend? Answer to this question is the relationship between the world’s two largest economies. Manufacturing iPhones, Mac books, and other electronic gadgets are getting riskier due to the trade dispute between U.S. & China. The relationship has worsened in the past few weeks due to the U.S. President’s accusation on China for mishandling the coronavirus pandemic. The COVID-19 pandemic has shattered the economy, forced many businesses to bankruptcy, and killed more than 100,000 people in the U.S. alone. Recently, a Chinese media reported that the Chinese Government may declare many U.S. companies like Apple, Qualcomm & Cisco as unreliable.
Over the years Apple has constructed a huge network of suppliers in China, in order to reduce costs. It is estimated that the Apple ecosystem employs around 2 million people worldwide, excluding its app developer network. Apple’s majority of sales occur in the U.S. but imports the finished product from China. Goldman Sachs has downgraded Apple from neutral to sell. Slowing iPhone demand, stagnant services growth like Apple TV+, Apple Music & unable to charge more for smartphones are some of its reasons.
In a Nutshell
Despite a global pandemic, Apple investors are up by 6% year to date. According to SEC filing, Gates Foundation Trust has bought around 501,044 Apple shares in the last three months. The Gates Foundation holds more than $40 billion in assets. Trust has also invested in other tech giants such as Amazon and Twitter. A deep dive into performance, analysts believe that Apple stock is traded first on momentum, then on product cycle and at last macroeconomic trend. The economy, due to pandemic, has shifted from consumers preferring experience to preferring things. This means that consumers are more aligned towards buying essentials and holding on the expenses like vacations and festivals. It signifies that people are staying at home. But since the economy is still functioning, there’s still plenty of consumer spending. This means more business for services like Amazon & Apple TV+ or Apple Music.
Apple iPhones cost near to about $1000 per phone. Apple’s financing options have given consumers the liberty of paying only little as $30 per month. The process has obliviated the need for cash upfront. Apple’s earnings report of the quarter has already infused confidence among investors. This is reflected in its recent surge in stock prices. This means that Apple is likely to weather the storm of COVID-19 better than anyone. Even if Apple faces many challenges on the trade front. With strong fundamentals and technical, Apple has gained momentum even in the pandemic.