Apple is trying for a big comeback says Graham Brooks analyst at Alan Davis Management.
London, Aug 27, 2019 (Issuewire.com) - The iPhone maker rallied nearly 2% on Monday, bouncing back from a major sell-off last week, as trade tensions between the U.S. and China hit a reprieve. Apple uses components made in China. The stock also got a lift after J.P. Morgan analysts said: "silver linings" such as pricing power and lower material costs should help it absorb tariff pain more than many investors expect.
JC O'Hara, the chief market technician at MKM Partners, says upward momentum in Apple shares should continue.
"This stock has been in an uptrend for the majority of 2019. We've seen a series of higher lows take place," Brooks said Monday on CNBC's "Trading Nation. "
Apple shares have climbed more than 30% this year. Since its recent low in June, it has surged 22%.
The stock has been marooned beneath one key level this year, though O'Hara sees that soon changing.
"Yes, $200 to $215 has been formidable resistance, but we really believe that if these trends continue to push positive that we will ultimately see a break above that level. Then all of a sudden, we're looking back at the 2018 highs around $230," said Brooks. "We really think there's at least another 8% to 10% baked into the stock with these positive trends behind us."
Apple last hit a record high in October. It is 12% below that peak.
John Kermish, managing director of Xtrade Advisors at Rockefeller Center, says Apple's place as a leader in the technology world remains indisputable.
"They've revolutionized the technology space, and that's not stopping. Every household across the globe has multiple products, multiple Apple products," Kermish said on "Trading Nation" on Monday. "The margins are improving, the demand is still there and you have a company trading at 16 times next year's earnings with a dividend yield of 1.5%, and in today's interest rate environment, that's not bad."
Apple's 16 times price-to-earnings ratio is below the XLK technology ETF's 19 times multiple. It also has a higher yield than the average for the tech space.
"We're recommending to our clients own Apple, keep it. Once this dark cloud of tariffs and trade wars move on, they're going to outperform in the next 12 to 18 months," said Brooks.
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