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AAPL stock is a buy despite its flaws


  • Apple (AAPL) the action remains remarkable in a difficult environment but it is not cheap.
  • AAPL stock has big bullish and bearish traders within it.
  • Now more than ever, Apple buyers can benefit from a necklace strategy.

Source: Vytautas Kielaitis / Shutterstock.com

Wall Street enjoyed a moment of relief and bargain hunting on Monday. Technology heavyweight Apple (NASDAQ:AAPL) shows what matters most to investors, as AAPL stock adds an oversized 4% compared to gains of around 1.60% and 1.86% in the Nasdaq and S&P500.

After last week’s bear market scare in the S&P 500, encouraging performance forecasts for JPMorgan Chase (NYSE:JPM) and optimism that the White House could eliminate Chinese trade tariffs led to a less than surprising rally. And perhaps less shockingly, the AAPL stock is leading the way out of its own deeper corrective cycle.

But can we ever make a positive trend change in Apple stocks that are ready to buy? Let’s look at some of the bullish and bearish arguments surrounding AAPL stocks and a method in which investors can buy more confidently and smartly over the long term.

Apple is still growing but…

Apple. The iconic tech giant remains one of the most coveted brands in the world. Investors like Warren Buffett Berkshire Hathaway (NYSE:BRK-ANYSE:BRK-B)and the second largest shareholder of AAPL stock, need not go very far to appreciate this fact.

For fiscal 2021, AAPL said it grew revenue 33% year over year and profit 71%. In the last quarter, the company surpassed street views and saw 825 million paid subscriptions across its growing software and services ecosystem.

Given the state of a difficult macroeconomic environment and a market capitalization of $2.23 trillion, which is only second to the energy giant Saudi Arabia (which overtook AAPL stock’s crown due to soaring energy prices), it’s hard to deny Apple’s continued global reach.

But this year’s double whammy of restrictive shutdowns in China linked to Covid-19 and the Russian invasion of Ukraine with their combined impact on inflation, supply chain and consumption is expected to weigh on growth. from the AAPL this year. Revenues and profits are expected to increase by only 8% and 10% in 2022.

It takes two to trade AAPL stock

The significant year-over-year squeeze in earnings and revenue growth this year may feel like a canary in the coal mine. But it would still represent an admirable boost to Apple’s revenue and bottom line in a tough operating environment.

Additionally, if we are to trust the recent words and actions of Berkshire’s Oracle of Omaha, in conjunction with a bloody price correction of around 20% this year, AAPL stock is also served buyers. Berkshire bought shares in 2022 due to weakness pervading the tech company’s business and oversized share buyback program.

But not everyone is impressed with Apple.

Fund manager Michael Burry, who made a $700 million bet against the housing market before the 2008-2009 financial crisis, targeted AAPL stock as a short position. A recent disclosure from the Securities and Exchange Commission (SEC) notes bearish sell positions valued at $36 million and nearly 18% of his firm’s portfolio.

So there may be something to this bet. Apple isn’t cheap to own on a historical basis. AAPL shares today are valued at more than 22 times earnings and 6.5 times sales. By comparison, in the decade before the pandemic began, stocks traded around mid-teens to earnings and mostly either side of 3x sales.

AAPL Strategic Ownership

Monday was a good session for bulls like Warren Buffett in AAPL stocks and less productive for bears like Michael Burry who bet against company stocks and have another negative characteristic of being time sensitive.

Of the two, I agree more with Berkshire’s ownership of Apple. And buying AAPL stock right now has the added benefit of testing Apple’s 38% retracement of its Covid-19 price cycle and having a weekly bullish stochastic oversold signal in place.

To be fair to Michael Burry, his bet against AAPL has a broken channel line working in his favor and lower lows and highs. Additionally, if Monday’s bargain hunting is to turn into something more substantial, the market will still need a follow-up day.

Bottom line, amid today’s big bulls and bears and if investors decide to buy AAPL stock, take inspiration from The big court investor and hedge the downside exposure with a long put option. And as the Oracle is known to do from time to time, combine married sell positioning with a buy sell to form a limited, actively managed risk collar to help buy and sell more effectively in bear markets. and bullish.

As of the date of publication, Chris Tyler had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

The information offered is based on the observations of Christopher Tyler and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related thoughts, follow Chris on Twitter @CAT_Options and StockTwits.



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