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Apple shares are down more than 9% for the year.
Mladen Antonov/AFP via Getty Images
Is there something wrong with
Apple
?
After a spectacular 81% rally in 2020, the tech giant’s shares have struggled mightily so far in 2021. Apple (ticker: AAPL) shares are down more than 9% for the year, and trailing the
S&P 500
by nearly 11 percentage points. While it’s certainly true that tech stocks generally have suffered this year, Apple has also underperformed the
Nasdaq Composite
(down more than 3% for the year) and the rest of the tech megacaps.
Bernstein analyst
Toni Sacconaghi
took a look at this situation on Friday, and found that Apple’s behavior has less to do with broader tech trends than it does the particular dynamics in Apple shares. While bulls might consider the recent weakness a buying opportunity, Sacconaghi thinks otherwise. He maintains his Market Perform rating and $132 target price.
Apple on Friday is up 0.2%, to $120.32.
Sacconaghi thinks the weakness in Apple shares this year reflects two basic factors. One, a large chunk of Apple’s outperformance in 2020 came from an increase in the stock’s valuation. Earnings grew, but the stock rallied even more. Apple’s multiple expanded by 51% last year, more than any of the other FAAMG stocks. In contrast, 2020 saw multiple increases of 4% for
Amazon,
15% for
Microsoft
and Alphabet and 16% for
Facebook,
the analyst notes. That in no small measure reflects first the anticipation and then launch of the iPhone 12 family, the company’s first generation of Apple phones for 5G networks.
Two, there’s also a sense that no obvious factors, such as new products, that might drive the stock higher in the immediate future. Last year at this time, investors were still awaiting the arrivals of iPhone 12. There is no similar excitement about iPhone 13.
“Over the last year, Apple has followed its traditional historical seasonal pattern of outperforming meaningfully in advance of iPhone product releases, and not outperforming thereafter,” Sacconaghi wrote in a research note.
“Accordingly, should investors look to follow the pattern, and go overweight in the coming months? We think not yet–Apple’s multiple is still rich versus history, Apple will be facing very strong iPad and Mac comparisons in the second half, and next year’s iPhone cycle will likely not offer compelling new functionality.”
It’s telling that all the Apple buzz this year is around the company’s potential entrance into the automobile market, a possibility that is years away at best, and might not ever happen. Apple could launch other new hardware–for instance, there has been speculation about virtual reality glasses–but the stock is lacking obvious catalysts.
Sacconaghi’s conclusion: There’s no rush to buy Apple shares.
Write to Eric J. Savitz at eric.savitz@barrons.com
