To borrow an old but pertinent Benjamin Graham/Warren Buffett concept, investors should be fearful when others are greedy. That’s a tough principle to apply with Apple (NASDAQ:AAPL) stock because it’s a good, solid company. Yet, even this stock can’t just keep going up without a downward retracement, so caution is advised. This will have important implications AAPL stock holders.
Sure, momentum-focused traders might be enamored with Apple stock now. On the other hand, long-term value investors shouldn’t be in a hurry. This doesn’t mean you have to dump your Apple shares, but just remember, there’s a time for buying and a time for waiting.
Major Milestones for Apple and AAPL Stock
Not long ago, Apple’s market capitalization exceeded $3 trillion. At around the same time, AAPL stock touched the $200 level.
If a share price of $200 doesn’t sound like much, remember that Apple has undergone multiple stock splits. In other words, you could think of the Apple share price as being in the quadruple digits.
Another way to put the share-price rally in perspective is to consider that Apple’s market cap gained $1 trillion this year. Mathematically, that would be a 50% increase from $2 trillion to $3 trillion. It’s mind-blowing when you think about it, but it should also be a red flag for value investors.
Apple Isn’t a Problem-Free Company
In case you’re concerned yet, consider this. Apple’s market cap is close to the combined market cap of every listed company in Paris, France. Yet, the company’s concerns in China haven’t just disappeared. There’s still friction between the U.S. and Chinese governments, and let’s not forget about the iPhone ban for China’s government workers.
Nevertheless, investors and analysts are overwhelmingly enthusiastic about Apple stock now. Certain ultra-bullish assumptions are being priced into AAPL stock.
For instance, according to Barron’s, “Analysts at UBS suggested that at a price point of $3,499 the first generation of the [Vision Pro headset] could generate around $1.4 billion of revenue in fiscal 2024, rising to $3.2 billion in fiscal 2025.” Similarly, Citigroup analyst Atif Malik considers “Vision Pro adoption” to be a “potential upside catalyst” for AAPL stock.
That’s quite optimistic, as it assumes that consumers are willing to buy a nearly $3,500 virtual reality headset. Besides, Apple reported year-over-year declines in sales of certain important product categories in the company’s most recent quarterly report. So, it’s fine to be cautious even if many analysts and stock traders can only envision Apple stock going up.
Apple Stock: No Urgent Need to Sell or Buy It
AAPL stock sells many iPhones, but that’s not the full story. There are obstacles, yet some people assume that Apple’s market cap can only go higher in 2024.
Assumptions are dangerous, even with a gigantic company like Apple. It’s fine to hold AAPL stock for the long term. Yet, after such a relentless rally this year, there’s no urgent need to buy Apple shares. Moreover, careful investors might let it come down 10% or 20% before buying any shares.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
