Apple Shakes Off Headwinds and Rallies to All-Time High

Dow component Apple Inc. (AAPL) blew away Q2 2020 top and bottom line estimates in April, posting $2.55 earnings-per-share (EPS) on $58.31 billion in revenue. The company raised their dividend by 6% to $0.82 per share at that time and increased the share repurchase program by a hefty $50 billion. Even so, quarterly revenues rose just 0.5%, highlighting the impact of first quarter shutdowns and quarantines around the world.

Apple Second Quarter Uncertainty

The company posted strong results in most divisions, with iPhone, iPad, and Services beating estimates. However, China revenue came up short, which makes sense because their shutdown began well before Europe or the United States. It also wasn’t a surprise that no fiscal Q3 guidance was offered, given uncertainty that’s likely to extend through 2020. That wisdom came to light last week, when Apple had to close stores in 4 states due to surging COVID-19 cases.

CEO Tim Cook was just interviewed for a “60 Minutes” segment, in which he defended himself and the company on charges they aren’t paying their fair share of taxes. “We turned the company upside-down to help the world on COVID, and donated all of that, hundreds of millions of dollars. And so, I think my own view is, you pay what you owe in taxes. And then you give back to society. And Apple is clearly doing that.”

Wall Street and Technical Outlook

Wall Street analysts are nearly universal in their bullish outlook, with 28 ‘Buy’ and just 6 ‘Hold’ recommendations. Not one analyst is recommending that investors sell the stock at this time. Price targets range from a low of $250 to a street high $410 while Apple is now trading just 20 points above the median $348 target. Given the rapid pace of upgrades so far in 2020, it’s likely those estimates will keep rising in the second half.

The stock sold off 114 points in the first quarter and turned tail, recouping the entire loss into May. It broke out to a new high in early June and has added more than 30 points since that time, carving a steady uptrend. However, accumulation readings have failed to keep up with bullish price action, signaling a bearish volume divergence that could short-circuit the rally with a minor bearish catalyst.  Even so, a pullback could mark a low risk buying opportunity, ahead of even stronger upside into 2021.