Apple (AAPL) had a major shake-up in the markets a month ago when its 7 for 1 stock split went into effect. For every one share of stock investors owned (trading at around $650 per share at the time), they now have for 1/7th of the value each. Apple’s share price has been hovering around the $93 price for the past month until the stock shot a bit higher this morning on the news of analyst upgrades.
This morning Pacific Crest analysts increased their price target from $93 to $100. Analysts are increasingly bullish on Apple, with the average price target for Apple stock at $101.49. The majority of analysis are also pushing a “buy” opinion. Analysts are bullish on the iWatch and iPhone 6 rumors plus Apple’s very investor friendly share buyback and dividend program.
Most analysts are promoting buy, so it’s time to buy, right? Eh, maybe. The key is to use the analyst opinions as a jump start for your own research, not to blindly follow their opinions. Not too long ago, when Apple was trading around $700 per share in 2012, analyst price targets were hitting the $1,000 mark. Not only did the stock never reach $1,000, but the shares essentially crashed.
I’m personally still on the fence about whether or not to buy Apple shares. On the positive side, I think the share repurchase programs and the stock split have made the stock more attractive to a wider net of investors. This means more investors willing to jump on board when positive news hits, thus driving up price. Plus, historical analysis shows that stocks with high dividends tend to be some of the best performing stocks over time. On top of that, a new product launch, such as the iPhone 6 or iWatch could be a huge boost for the company. This morning news came out that Apple hired the vice president of sales for luxury Swiss watch brand Tag Heuer, another indicator that the iWatch could be coming soon.
I hesitate to buy though because I think a truly innovative new product, such as the iWatch, is still far away. I haven’t seen enough evidence yet that this is coming up in the near future. More importantly, the rumors of a new product have been swirling for a long time now. I worry that new products are already too built into the share price and there is not enough room left for a big upward surprise.
Apple releases Q3 earnings on July 22. My plan is to buy if the stock drops back down closer to $90-$91 in the next few weeks. If it doesn’t drop, I’ll wait until earnings are announced and make a buy decision after the market reaction to earnings has settled.