Apple stock forecast: a fruitful few months ahead?

The Apple stock forecast is a bit difficult to gauge right now because of the upcoming stock split, though the company recently hit a market cap of $2tn

The Apple stock forecast has taken an interesting twist because of how the tech giant is planning to embark on a stock split at the end of August. At the time of writing, shares are trading at $466, but the four-for-one divide will knock the price down to $116.50.

Over time, this could be exceedingly good news for the Apple stock price forecast, as data suggests companies tend to outperform the market after undergoing a split. Here, we’re going to offer analysis about this rare manoeuvre, and give you a quick recap of all the latest Apple stock news.

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Will Apple stock go up?

Although the dollar worth of Apple stock is unlikely to return to $466 for some time after the stock split has taken place, the company’s market capitalisation certainly has room to run. But because of the decision taken by Apple, stock market dynamics are going to change. The Dow Jones is weighted based on share price rather than valuation, and this means Apple will no longer be the biggest constituent on this industrial average. This is in stark contrast to the S&P 500, where market capitalisation is used to calculate the composition of the index.

Some analysts believe the Apple shares forecast has now become much more optimistic because of the stock split. Companies tend to endure these expensive processes when their share prices become too high, as this can be off-putting to retail investors. A more palatable quotation could encourage an influx of new capital into the company.

Apple stock news

In mid-August, Apple stock predictions were buoyed by a significant milestone. The iPhone manufacturer has become the very first American company to achieve a valuation of $2tn – about two years after it surpassed the $1tn mark. Growth in Apple shares has been nothing short of extraordinary since April, more than doubling from lows of about $225, which coincided with markets hitting rock bottom because of Covid-19. The company’s recent success has also been exceedingly good news for CEO Tim Cook, who has officially become a millionaire after spending nine years at the helm.

Given how well the stock is performing, you would expect that Apple wouldn’t want to rest on its laurels, and it would be aggressively plundering its profits into research and development to cement its position as the one of the world’s premier technology brands.

Alas, recently released figures suggest this isn’t the case. According to Bernstein’s Toni Sacconaghi, the California-based company is spending far, far less on innovation than its peers. This often sets off alarm bells in the eyes of analysts who try to make long-term Apple stock price predictions. Focusing less on R&D is a high-stakes bet that consumers will be happy with the products that are in the pipeline, and that rivals don’t have something revolutionary in the works. Just look at what happened to Nokia and BlackBerry – two seemingly unstoppable mobile phone brands that fell by the wayside as other manufacturers stepped in and stole market share thanks to their fresher ideas.

Apple stock: buy or sell?

Of course, such doom and gloom doesn’t fully illustrate the strong position that Apple currently finds itself in. The company has quickly become a mainstay thanks to Apple Pay, the contactless payments system that’s tacked onto every iPhone and Mac. To illustrate the astronomical growth in this mobile-focused service, Apple Pay had just 67 million users back in September 2016. Fast forward to September 2017 and it had close to seven times more – a jaw-dropping 441 million. We’re yet to get a clearer indication of the figures for 2020, but given how consumers have had little choice but to shun cash because of how it could help spread Covid-19, it’s highly likely there has been another big jump over recent months.

So, back to the question at hand: is the Apple stock forecast looking upbeat in the coming months? Well, unfortunately there’s a real risk that Covid-19 could end up battering the markets once again if cases continue their stubborn rise upwards. But that said, historical analysis shows that we’re about to head into one of the best times of the year for buying Apple shares… in the run-up to the release of new iPhones.

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The launch of the iPhone 12 range is set to be especially significant, with rumours suggesting that these smartphones will be 5G compatible for the very first time. In a research note, Evercore ISI analyst Amit Daryanani recently said:

“In past launches, the greatest average outperformance has come during the 180-day period leading to the launch. The 90-day period prior to the launch has also generated solid outperformance with lower volatility than the 180-day period. The 30 and 90-day periods following a launch have underperformed on average, although the dispersion of results here is far wider than in the periods prior to the launch.”

Based on Daryanani’s analysis, this means that investors who are hoping to enjoy an upside from the latest iPhone release might want to get their skates on. Reports suggest the launch has been pencilled in for 19 October, meaning that we’ve now got less than two months to go before the big reveal.

Apple stock forecast: The road ahead

According to CNN Business, 37 analysts who were polled to give their predictions about Apple stock were more on the optimistic side. The highest forecast suggests that its shares will rise 10.8 per cent to $515, with a median estimate indicating there will be a 4.3 per cent fall to $445. The most pessimistic estimate warns of a 32.5 per cent fall to $314. (Note: do remember that the stock split on 31 August will render these forecasts meaningless – and effectively mean that the high-end forecast will be $128.75, the median at $111.25, and the low-end at $78.50.)

Overall, it seems that analysts still overwhelmingly recommend buying the stock. Of the 41 polled by CNN, 22 have a buy rating and three predict it will outperform. Twelve analysts have a hold rating, one thinks Apple will underperform, and three have a sell rating.

With a stock split and a long-awaited product launch on the horizon, it’s certainly going to be a monumental few months for the team in Cupertino.

FURTHER READING: Best investments for 2020: what are your options?

FURTHER READING: Blue-chip stocks: are they the best bet?

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