A One-Two Punch Knocks Apple Stock Off The Top

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After months trying to reclaim all-time highs, Apple stock  (AAPL) – Get Report finally did it earlier in July – only to be quickly pushed back about 5% off the peak in a matter of a few days.

Recent weakness in share price has been consistent with broad market softness that was largely driven by fears over the COVID-19 delta variant. However, Apple may have also suffered from a couple of company-specific pieces of news that the Apple Maven discusses today.

Figure 1: Apple logo.

iStock

(Read more from the Apple Maven: iPhone 13 Could Push Apple Stock Even Higher)

Killing Apple’s mojo

On Friday, July 16, research firm Canalys issued its second quarter report on smartphone shipments. In the aggregate, the numbers were far from concerning: the industry grew year-over-year at a pace of 12%, albeit off a slow quarter of sales in 2020 marked by the first few innings of the COVID-19 crisis.

Worse off in the report was Apple. Even coming off a slow second quarter of 2020, the Cupertino company saw minimal growth in iPhone shipments in the most recent period, according to Canalys. Not only that, Xiaomi took Apple’s second spot as most popular smartphone vendor for the first time ever.

Figure 2: Worldwide smartphone shipments Q2, 2021.

Canalys

(Read more from the Apple Maven: How Wall Street Enthusiasm Fueled The Rally In Apple Stock)

The other development surfaced over the weekend. Seeking Alpha reported that the iPhone could be more vulnerable to spyware than some previously thought. Researchers at the Pegasus Project believe that surveillance company NSO Group could breach Apple’s phones through zero-touch attacks.

The iPhone is not the only potential target of this and other similar breaches. But Apple arguably stands to lose most from the perception of decreased security, since the company often boasts about the iPhone’s resilience to malicious attacks – a core tenet of Apple’s defense in the case against Epic Games over the App Store.

The Apple Maven’s take

Both issues above leave Apple with a black eye, which is reflected in the stock. But the Apple Maven does not think that this is the time for panic.

For starters, the smartphone shipment data is confined to a single quarter. Growth of 1% in iPhones was pitiful, but barely indicative of a problem with the 5G upgrade cycle that could still last a few years. Also, despite Apple’s loss of market share, it is likely to have performed well at the higher-end of the spectrum – which tends to generate higher ASPs (average selling prices) and carry better margins.

Regarding security, the Apple Maven thinks that investors should expect the issue to surface often. If anything, Apple is probably better equipped to deal with the problem, since the company has the scale and the cash reserves to address it. Will iPhone sales decline because of the most recent security scare? The Apple Maven thinks that probably not, at least for now.

Sell AAPL in a hurry?

Traders might be feeling a bit uncomfortable about AAPL being unable to hang on to its all-time high. Might there be too much selling pressure at a share price level of around $150? Is momentum over?

But long-term investors are probably better off ignoring the noise. The Apple Maven believes that Apple stock is still well positioned ahead of earnings day, even near a peak – while understanding that the largest gains in AAPL tend to come only after a double-digit pullback in the stock price.

Twitter speaks

Apple stock finally reached an all-time high earlier in July, only to pull back quickly in a matter of days. Are you concerned that AAPL may have peaked and is ready to come back down?

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)