AAPL stock gains despite Microsoft warning

• AAPL stock closed up 1.68% at $151.21 on Thursday.
• Apple shares were the subject of a recent deep dive where FXStreet set a $100 price target.
• Apple faces headwinds from China and has moved some production to Vietnam.

Apple (AAPL) gained on Thursday despite the tech sector taking a sentiment hit from another tech giant, Microsoft (MSFT), earlier in the day. Microsoft warned of a strong dollar hurting profits, which we have alluded to previously in our weekly review. A strong dollar has a strong correlation with falling earnings for US companies, especially in the multi-jurisdictional sector. Apple has approximately 65% of its revenue outside the US in non-dollar currencies, so converting back into a strong dollar automatically hits profitability. This is what Microsoft is warning about.

Also read: Apple Stock Deep Dive: AAPL price target at $100 on falling 2023 revenues

Apple stock news: Production problems see a shift to Vietnam

In response to the covid restrictions in China, Apple moved some iPad production from Vietnam to China. The iPhone is the main revenue driver, and Apple last year sacrificed some iPad production toward iPhones when it prioritized chips for iPhones over iPads. This may be another example of prioritizing the iPhone and aiming to maximize the higher-margin Chinese production once it comes on stream. Recent reports from China look encouraging as restrictions continue to be eased and manufacturing facilities come back online. The iPhone represents over 50% of Apple’s revenue, while the iPad is a meager 7% by comparison. Chinese margins run at 42% versus 35% for the EU and 37% for the US. 

We recently produced our deep dive investment bank research into Apple, and our resulting $100 price target has raised some eyebrows. We should note price targets are for 12-month time horizons, and the outlook remains decidedly mixed. We modeled a modest 10% reduction in revenues back to 2019 levels. We outlined valuations on both DCF and relative value P/E modeling.

Evercore also sounded a cautious note on Thursday as they noted App Store revenue showing limited growth. Despite this tough environment, Apple performed well on Thursday as US equity indices all finished higher. Friday’s employment report will be a key macro event for both Apple and the broader stock market.

Also read: Tesla Stock Deep Dive: Price target at $400 on China headwinds, margin compression, lower deliveries

Apple stock forecast: Potential for Death Cross

The retracement to resistance at $150 is now complete, which shows perfect timing ahead of Friday’s employment report. A sustained move will see the 200-day moving average at $160 tested. Note also the potential for a bearish Death Cross signal, which is when the 50-day moving average crosses its 200-day counterpart. Huge support remains at $138. 

AAPL chart, daily