(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of AAPL.)
Apple Inc.'s (AAPL) stock has put together a solid 2018, with shares rising by just over 9%—easily topping the S&P 500's rise of only 1.7%. But the outlook for the stock may be about to get much brighter. The technical chart suggests that shares of the company may rise by another 8% in the coming weeks.
Analysts are looking for the company to report a strong fiscal third quarter when posting its results at the beginning of August. Additionally, analysts have been pushing their average price target on the stock higher in recent months, and now see the stock climbing by roughly 7.5% to $199, from its current price of around $185.
The stock has been trending higher since February of 2017, but recently ran into technical resistance at the uptrend around $195, resulting in shares falling by about 7.5% back to $180 a technical support level. Since the pullback the stock has been consolidating and is now attempting to break out, rising above a resistance level at $185. Should that happen, the stock has a clear path to continue to move higher towards resistance along the uptrend line at $200.
Volume has been at normal levels in recent weeks, suggesting the selling pressure hasn't increased during the recent stock decline. Additionally, the relative strength index has also been trending higher since hitting oversold levels below 30 in mid-February, a bullish indication. (For more, see also: Why Apple's Stock Will Bounce Back.)
Bullish momentum may be building in the stock ahead of what is expected to be a solid quarter for Apple. Analysts are looking for the company to say that fiscal third-quarter earnings grew by nearly 31% to $2.18 per share, while revenue is forecast to have climbed by almost 15.5% to $52.41 billion.
Analysts have also been upping their price target on the stock. Since the start of 2018, the average analyst's price target on the stock has risen by over 5% to what is now nearly $199. Meanwhile, according to data from YCharts, some analysts see the stock climbing even further, perhaps to $235, a jump of almost 27% from the current price of approximately $185 on June 29. Meanwhile, the lowest price target on the stock stands at $165, a drop of about 11%.
One metric many analysts and investors will be watching when Apple does report its third-quarter results will be service revenues which grew to represent nearly 15% of the company's total revenue in the fiscal second quarter. (For more, see also: Why Apple's Stock May Have Peaked.)
Apple's results later this summer, and more importantly the guidance the company provides, may only be part of the equation as to how far the stock shall rise or fall. The big event that may ultimately determine Apple's fate will likely come in September when investors learn about the future state of Apple's newest iPhones.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.