With more negative news flowing in for Apple Inc. (NASDAQ:AAPL), will the AAPL stock recovery take a hit?
Shares of Cupertino, California based Apple Inc. (NASDAQ:AAPL) recently had one of their biggest pullbacks in recent times but they now look set to be back on the recovery path. However, there seems to be no end to the spate of negative news surrounding its latest products. We did highlight in our recent coverage that most of these negative news seem to be overblown. While we believe that there is no doubt about Apple stock's long-term prospects and it also happens to be one of our top stock picks from the tech sector, for now, the question arises, is AAPL stock past its bottom? Apple stock has nudged higher over the last two days but it needs to be seen whether the influx of negative news act as a speed bump to Apple stock's recovery. Let's take a closer look.
Latest news discouraging for Apple stock.
A recent WSJ report suggests that Apple's $1000 iPhone X has hit a production snag. The issue is related to the components used in the much talked about new iPhone X's facial recognition feature. These components are facing a supply issue and there are concerns for extended shortages once the iPhone X hits stores. Well, if these reports are true, then this doesn't sound good for Apple investors. Many in the market are betting on the iPhone X to offset lukewarm response to the iPhone 8 series and drive the company to record revenues and profits.
On the other hand, the recent news surrounding the Cupertino giant's Apple Watch Series 3 and iPhone 8 also hasn't been encouraging. Apple Watch series 3 and iPhone 8, both had few issues reported. Apple has also acknowledged a few of them and it appears that Apple could sort them out before they get out of hand. Still, some reports suggest that the iPhone 8 and iPhone 8 Plus issues could have an impact on sales given early signs that the devices aren’t selling as well as hoped. Further, all this doesn't go well with the high-quality image of Apple products. The investor sentiment has taken a hit due to ongoing negative news coverage and has made some investors little anxious about the iPhone X release.
What are Wall Street Analysts saying?
Wall Street is yet to make up its mind on the ongoing negative news coverage regarding iPhone 8 sales and iPhone X delay. Chris Caso of Raymond James has warned of an iPhone X delay and stated: "While the industry widely anticipated a shift in iPhone production timing, our checks suggest there is an incremental delay in the iPhone X build plans." On the other hand, MKM Partners's Michael Genovese, while upgrading his rating on one of the major Apple supplier Lumentum, which supplies VCSELs diodes used in the forthcoming iPhone X that makes possible facial recognition, urged investors to ignore the noise about iPhone X delays. He said, "our checks tell us that Lumentum's VCSEL orders and yields have steadily improved in recent weeks". This commentary almost contradicts reports of iPhone X delay, as in case of a delay, Apple would not like to build an unwanted inventory of components.
Further, Abhey Lamba of Mizuho suggested that based on his conclusion from his Asia-Pacific associates, "the discounted iPhone 7 and 7 Plus, last year’s models, are going to see increased demand, offsetting the slack iPhone 8 demand." Famous Apple analyst, KGI Securities' Ming-Chi Kuo, trashed the "reports of lower-than-expected iPhone 8 sales as overdone and called the market's response excessively negative." It is still little too early to judge the impact of reported slow iPhone 8 sales on the company's top line for the current quarter. Further, despite the negative sentiment, many analysts have hiked their price targets for Apple stock recently.
Is Apple stock past the bottom?
We believe that the continuous inrush of negative news will likely put pressure on Apple stock in the near-term. All said and done, the negative commentary around Apple stock seems to be overdone. AAPL stock could likely resume its uptrend as the iPhone X sale date draws near and the picture about the actual delay becomes clearer. If one takes a look at the Apple stock technical chart, the stock seems to have gone past its bottom. AAPL stock has moved out of oversold territory as per both Relative Strength Index (RSI) and Bollinger Bands indicator. Further, Apple shares made a bullish breakout above the 100-day simple moving average (SMA) in yesterday's trade. All these technical developments bode well for the stock. Geopolitical concerns and more negative news coverage could still be a dampener. However, Apple stock remains a good buy for the long term and investors should make use of any major pullback to buy more Apple shares on the cheap.
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