'Dumb money' investors are touting Apple stock again - just as the company steps back on shipments for the iPhone 12.
With shares up over 78% in the past year, Apple (NASDAQ:AAPL) looks like a safe-haven play in the stock market.
And, sure, the company’s $1.5 trillion market cap means it’s not likely to double as quickly as a smaller company, say one in bankruptcy. But investors still love the firm.
“Buy Apple” is trending on social media Tuesday. While that’s created a few memes about buying the actual fruit, there’s also a contingent of posters talking up the company’s past performance.
After all, had you only purchased shares when they were cheaper, ipso facto, they’d be worth more today!
With a social media trend focused on Apple’s past returns, it’s another sign of the retail crowd moving the market yet again.
That’s a danger. Yes, Apple is a huge company. And it’s likely to succeed in today’s uncertain environment. But that doesn’t mean shares will continue their phenomenal performance.
But short term? Apple can and does have problems from time to time. And right now, it’s warning of dangers in the present and immediate future.
Here’s a big one: Apple suppliers are expecting a 50% component cut for the iPhone 12.
Retail traders may think that’s bullish. But you can’t cut the number of components in a phone in half and still have a working phone.
Instead, it means that Apple is quietly tipping off those in-the-know that demand will be far weaker than initially expected.
And this isn’t the first warning signal Apple has quietly given off. Three weeks ago, Broadcom, one of their suppliers, actually came out and reported that it expected the iPhone 12 launch to be delayed.
Over the years, supplier trends have provided a good idea of where the company’s sales will end up when it finally reports its earnings numbers.
Look, Apple is a great company overall. Over time, it should do fine. That’s especially true with the company’s foray into streaming with Apple TV+ and other higher-profit-margin endeavors that require less physical suppliers.
But if demand for its products is weak right now, it will have some challenges seeing its share price head meaningfully higher.
That spells trouble for the company. Apple alone is nearly 10% of the heavily-watched Dow. Apple also makes up nearly 6% of the S&P 500. So any struggles for Apple could translate into big trouble for the stock market as well.
Long-term, retail investors in Apple aren’t wrong. But short-term, there’s a pretty good chance shares will take a hit, especially given the bullish expectations of iPhone 12 sales.
Today’s buyers are playing with fire. Those with the patience to wait for a pullback will fare far better.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.
Last modified: September 23, 2020 2:02 PM