In a yr when the novel coronavirus battered demand for a lot of services and products, Apple (NASDAQ:AAPL) has remained resilient and AAPL inventory holders have loved stable features. Amazingly, the share value continues to be pretty near its all-time excessive.
Momentum-focused merchants would possibly view this situation as extraordinarily bullish for AAPL inventory. In any case, the development is your good friend, proper? In addition to, with the vacation season developing quickly, it appears fairly wise to load up on AAPL shares right now.
But, I all the time say that the obvious commerce is usually the incorrect one. I’m not making an attempt to recommend that anybody ought to short-sell AAPL inventory or purchase put choices. That will be self-destructive.
Moderately, I’m making an attempt to emphasise the significance of timing one’s entry level correctly. On this case, nimble timing may imply ready for a pullback. For AAPL inventory specifically, there’s trigger for concern stemming from flagging smartphone shipments overseas.
A Nearer Have a look at AAPL Inventory
As you would possibly recall, it was a serious information occasion when Apple announced a four-for-one share split in late July. By the point the lower-priced shares began buying and selling in late August, the AAPL inventory value had already reached an astounding $500.
Having a decrease post-split value doesn’t actually imply that AAPL inventory is reasonable now. On Sept. 1, AAPL hit its all-time excessive value (adjusted for the break up) of $137.98. The share value has retraced barely since that point, closing at $119 and alter on Nov. 13.
Admittedly, AAPL inventory isn’t precisely buying and selling at its all-time excessive value. Nonetheless, it’s nonetheless pretty costly in a time when the pandemic induced excessive unemployment and diminished the demand for quite a few merchandise.
I’m not making an attempt to indicate that AAPL inventory is in a bubble. Its trailing 12-month price-to-earnings ratio of 36.36 isn’t too excessive, but it surely’s not super-low, both. Worth seekers would possibly take into account ready for each the P/E ratio and the share value to dip earlier than taking an extended place.
A Drawback in China
It’s usually a good suggestion for tech-sector traders to observe not solely what’s taking place in the USA, but additionally what’s happening in different nations all over the world.
China is likely one of the most influential international locations, and if the smartphone market isn’t sturdy there, this might create issues for AAPL inventory holders in the long term.
Sadly, official information point out that Apple should compete in a shrinking Chinese language smartphone market. In response to the China Academy of Info and Communications Know-how, a assume tank backed by the Chinese language authorities, cellphone makers solely shipped 25 million handsets in the course of the month of October.
In comparison with the 34.6 million handsets shipped a yr earlier, this represents a discouraging 27% decline in smartphone shipments in China.
A Troubling Development
And don’t assume that this can be a fluke, as there was a 36% year-over-year decline in Chinese language handset shipments in September of 2020. Extra particularly, the variety of shipments totaled 22 million for the month, in comparison with 34.7 million in September 2019.
Furthermore, information derives from third-party analysis corporations present that Apple skilled a year-on-year decline in smartphone shipments decline throughout 2020’s third quarter.
It’s additionally identified that Apple’s smartphone income for the September quarter retreated by 20.7% on a year-over-year basis. Moreover, Apple’s China income fell 28.6% in comparison with the September quarter of the prior yr.
I might strongly encourage overenthusiastic Apple bulls to contemplate the foregoing statistics earlier than taking a big place in AAPL inventory. The upcoming vacation season would possibly or won’t present a large increase in smartphone gross sales. But, the latest information exhibits a troubling development as handset shipments disappoint in an important nation.
The Backside Line
It’s important for tech-market merchants to contemplate a worldwide view. China’s smartphone gross sales have been disappointing these days. This issue may trigger points for AAPL inventory holders.
You don’t must dump your whole AAPL inventory shares due to this. As an alternative, it’s doable to take a cautious stance when you had been fascinated about shopping for extra shares now.
On the date of publication, David Moadel didn’t have (both instantly or not directly) any positions within the securities talked about on this article.
David Moadel has offered compelling content material – and crossed the occasional line – on behalf of Crush the Road, Market Realist, TalkMarkets, Finom Group, Benzinga, and (in fact) InvestorPlace.com. He additionally serves because the chief analyst and market researcher for Portfolio Wealth World and hosts the favored monetary YouTube channel Trying on the Markets.