Black Friday Sends Reality Check to AAPL Stock Bears
Contrary to what the market speculated, Apple Inc. (NASDAQ:AAPL) witnessed strong demand for its products over the Black Friday weekend, yet AAPL stock is down more than two percent this week. Here’s why Mr. Market is wrong on Apple stock.
This holiday season, the top-performing retailer in terms of traffic turned out to be Target Corporation (NYSE:TGT). The retailer not only had solid in-store sales, but it also had stellar online sales. What was its best-selling product? You guessed it! Apple products, specifically “iPads” and “Apple Watches” were the top sellers during the chain retailer’s Black Friday sales. (Source: “Target Reports Strong Start to Black Friday Weekend Online and In Stores,” Target Corporation, November 27, 2015.) Demand for iPads was so huge that throughout Thanksgiving Day, with early access to Black Friday deals via the company’s web site, Target sold one iPad per second. Yes, every second!
The second top-performing retailer, Best Buy, also reported the strongest sales for Apple products, including “iPhones,” iPads, and Apple Watches. In fact, overall, this Black Friday is being cited as historically the best ever season for Apple. (Source: “This Black Friday Was Strongest In Apple’s History: Global Equities,” Barron’s, November 30, 2015.)
Now, Apple did not post any promotional price cuts for its products on its web site, thus maintaining its premium brand status. However, retailers went for promotional pricing on their own, which has worked wonders for Apple. In particular, the $50.00 in savings offered on Apple Watches by various retailers is expected to achieve a sell-through of more than six million units across the country.
Now, these statistics question the shorts’ oft-repeated bearish narrative on AAPL stock that the company’s products are losing their charm. Indeed, the iPad was the worst-performing product in the last quarter in terms of sales, witnessing a significant 19.5% year-over-year decline, and the latest “iPad Pro” also received a lot of thumbs down from the techies.
Additionally, Apple remained reluctant in giving away any numbers on the Apple Watch’s sales volume in the latest quarter, which had many skeptical over the product’s demand.
However, the holiday sales figures being posted by the top U.S. retailers indicate that both these segments might be on their way to posting strong revenue growth by the end of this quarter. The numbers are looking great so far and they bear a positive signal that the company has nothing to worry about when it comes to its fundamentals.
As for technicals, almost all indicators are bullish on AAPL stock.
The stock has found resistance at $110.00 and an uptrend is in play, with the stock making higher lows and higher highs since last month. The accumulation-distribution line, which hints at whether the market is accumulating the stock or selling it, is also pointing to strong buying activity on the market.
Chart courtesy of www.StockCharts.com
Apple remains one of the most speculative bets on the market because of the high institutional stakes in the stock. With almost 59% of Apple stock’s float in the hands of big institutions, it is understandable that the movements have largely remained unpredictable.
Big chunks of the stock are sold and bought in a flurry, leaving loyal investors nervous. However, both the fundamentals and technicals are looking strong at the moment. From where I see it, the market is betting on the buy side.
The Bottom Line on AAPL Stock
Apple has a promising portfolio of tech products with strong consumer demand. At the same time, the company is making an effort to transition into a full-blown tech conglomerate, making big bets on financial payment services, automobiles (rumored), and virtual reality.
In a nutshell, AAPL stock looks like a promising bet at its current levels.