Apple Stock a Screaming Buy, Will Surge 21% Despite Underwhelming Apple TV+ Launch: Analysts
Apple stock bled out on Monday afternoon as Tim Cook revealed his long-awaited Netflix rival, Apple TV+.
Traders were immediately underwhelmed by the lack of details and the stock ended the day 1.2 percent lower.
But don’t believe the hype. Wall Street analysts have weighed in since the announcement and most still think Apple stock is a screaming buy.
Apple stock has 21% upside
At least seven analysts re-affirmed their “buy rating” on Apple shares after the big reveal. The most optimistic of which (Samik Chatterjee at JP Morgan) put a $228 price target on the stock– a 21 percent upside from yesterday’s closing price.
Wall Street analysts believe Apple stock will recover its losses and return to an all-time high. Source: Yahoo Finance
The $228 price target would take Apple stock within touching distance of its all-time high.Chatterjee did show concern for Apple’s lack of clarity on its streaming service. But said Apple’s new credit card and its “Arcade” gaming service gives it a new edge.
Netflix has an “Inferior Position” to Apple
One of the most damning assessments for Netflix came from analysts at Needham. Laura Martin said:
“NFLX has an inferior competitive position to AAPL over time.”
Lot of ifs in this scenario. But FWIW, Needham analyst Laura Martin estimates $AAPL could generate $32B in new sales from subscription TV/games/news. Apple could use to fund new content. That budget would be more than 2X $NFLX. And Netflix borrowing money for its new show binge.
If you look back at previous launch events, you’ll see a pattern in Apple stock. It almost always falls on the day of the announcement and for the following week. But in the medium-term, there’s a strong recovery.
Apple’s stock performance after major product launches. Source: Bloomberg
On average, Apple stock rebounds 10.7 percent in the three months following major product launches.
Why did traders dump Apple shares?
Traders were underwhelmed by the lack of details in the Apple TV+ announcement. We saw plenty of celebrities including Oprah, Jason Momoa, and Steven Spielberg outline their vision for Apple TV+, but no concrete facts.
No price indication, no launch date, no timeline, no details on how it will integrate other services like HBO.
“We do not believe today’s announcement is a major catalyst for the shares as consumers are slow to change their behavior.”
Meanwhile, short interest in Apple stock is at a three-year high after climbing 143 percent. More and more traders are now betting against the shares.
There has been a 143 percent surge in short interest in Apple stock in recent weeks. Source: Market Watch
Apple services are a long play
The days of big, sexy Apple product launches are coming to an end. Apple is pivoting towards a reliable ecosystem of deeply integrated services. It might not impress traders right now, but the world’s largest company is building an unstoppable long-term strategy.