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Apple Stock Surged 7.6% in July: Here’s Why

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Apple (AAPL) stock rose 7.6% in July after gaining 13.1% in June. This year, June has been Apple stock’s strongest month. The company’s strong fiscal 2019 third-quarter results raised its stock by 2.0% on the last day of July. Improved iPhone sales, non-iPhone revenue strength, and better-than-expected fourth-quarter guidance boosted investor sentiment.

However, US markets fell on July 31 after Fed chairman Jerome Powell indicated rate cuts might not be as aggressive as Wall Street expected. While Apple rose yesterday, the S&P 500, Dow Jones, and Nasdaq Composite fell 1.1%, 1.2%, and 1.2%. In July, they rose 1.3%, 1.0%, and 2.1%, respectively.

Year-to-date, Apple has risen 35.1%, while the S&P 500, Dow Jones and Nasdaq have risen 18.9%, 15.2%, and 23.2%, respectively. Meanwhile, FAANG stocks Facebook, Amazon, Netflix, and Alphabet’s Google have risen 48.2%, 24.3%, 20.7%, and 17.5%.

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Factors that influenced Apple stock

Notably, Apple stock fell 2.1% on July 8, triggered by a rating downgrade by Rosenblatt Securities to “sell” from “neutral.” Rosenblatt cited lower Apple iPhone sales and a slowdown in products such as iPads as reasons for the downgrade.

On July 18, Raymond James upgraded Apple stock to “outperform” from “market perform,” setting its price target at $250. The upgrade was backed by optimistic prospects for Apple’s 5G iPhone. On July 25, Apple announced an agreement to acquire most of Intel’s (INTC) smartphone modem business for $1 billion.

In July, Apple and other tech stocks continued to be affected by uncertainty over US-China trade and rate cuts. On July 26, Apple stock rose 0.7% despite Donald Trump tweeting that Mac Pro parts made in China would not be granted a tariff waiver.

Before Apple’s third-quarter release on July 30, there was positive sentiment for its stock. Morgan Stanley raised its price target for Apple to $247 from $231. It believed the tech giant was unlikely to issue lower-than-anticipated fourth-quarter guidance.

Apple’s valuation

As of July 31, Apple’s 12-month forward PE ratio had risen 5.8% in July to 17.1x. In fiscal 2019, analysts expect Apple’s adjusted EPS to fall 2.7% to $11.59, and its revenue to fall 2.7% to $258.4 billion. In fiscal 2020, they expect Apple’s adjusted EPS to rise 9.2% to $12.66, and its revenue to grow about 4.3% to $269.5 billion. As of July 31, analysts’ 12-month average price target for Apple stock was $223.55, which implies an upside of about 5%.

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