Apple Could Top Out After Stock SplitApple has nearly doubled in price since October and could post a major top after the August 24th 4-for-1 split.
Dow component Apple Inc. (AAPL) is trading at an all-time high above 445 on Thursday after a dramatic breakout, triggered by blowout fiscal Q3 2020 results. The tech icon earned $2.58 per-share during the quarter, $0.51 better than estimates, while revenue rose 10.9% year-over-year to $59.69 billion, beating $52.56 billion consensus by a wide margin. Double digit growth in iPads, Macs, and wearables underpinned the bullish metrics while iPhone revenue rose 1.5% year-over-year to $26.4 billion, better than $22.0 billion consensus.
Apple Declares 4-For-1 Stock Split
The company declared a 4-for-1 stock split for investors of record at the close on August 24. The news surprised Wall Street veterans because this formerly-common practice has been abandoned in the last 20 years, in favor of buybacks and higher prices to attract more desirable institutional ownership. The recent explosion in commission-free accounts has apparently forced a paradigm shift, with younger, under-capitalized traders favoring cheaper stocks.
CFO Luca Maestri took note of the historic results, proclaiming “our second quarter performance was strong evidence of Apple’s ability to innovate and execute during challenging times. The record business results drove our active installed base of devices to an all-time high in all of our geographic segments and all major product categories. We grew EPS by 18% and generated operating cash flow of $16.3 billion during the quarter … a record for both metrics.”
Wall Street And Technical Outlook
Wall Street consensus is less bullish than might be expected, with a ‘Moderate Buy’ rating based upon 23 ‘Buy’ and 6 ‘Hold’ recommendations. Two analysts now think the stock is over-priced and are telling shareholders take profits and move to the sidelines. Price targets currently range from a low of $295 to a street-high $500 while the stock is now trading about $18 above the median $427 target. These metrics may presage a major top after the split date later this month.
Apple broke out above the 2018 high at 233 in October 2019 and has nearly doubled in price since that time, setting off long-term overbought technical readings. That hasn’t stopped the stock from gaining ground but is warning new shareholders the uptrend is getting ‘long-in-the-tooth. In addition, the rally has now stretched twice the length of the first quarter selloff, reaching an harmonic Fibonacci extension that favors a reversal lasting weeks or months.