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Apple Stock Rallies in 2019: Will the Bull Run Continue?

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Oct. 6 2019, Updated 6:43 p.m. ET

It wouldn’t be wrong to say that the last week belonged to Apple (AAPL). Apple stock jumped 3.7% from the previous week’s closing and ended at $227.01 on Friday. The stock reached its highest level in 2019 and is just 0.4% shy of its 52-week high. The stock movement throughout the week was volatile on macroeconomic and political concerns. However, the iPhone 11 saved it. Read more to find how the Apple stock moved last week.

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A positive start for Apple stock

The week began on an upbeat note for Apple as it climbed 1.9% on Monday. JP Morgan Chase stated that Apple stock is poised to move 20% higher by December 2020 amid robust iPhone demand. The bank also raised its price target to $265 from $243. This price target is the highest among most Wall Street banks. JP Morgan analyst Samik Chatterjee stated that Apple’s iPhone sales from its latest stream of launches had surpassed expectations.

Last month, Apple analyst Ming-Chi Kuo boosted his forecast for iPhone 11 series shipments from 65 million to 70 million units in 2019 to 70 million to 75 million units.” The positive indications about iPhone demand ignited hope among investors, and JP Morgan strengthened it. The bank has projected that the current product cycle would lead to 198 million phone shipments in 2020. In 2021, the shipments would rise to 200 million.

According to Bloomberg data, Apple has 24 “buy” ratings, 19 “hold” ratings, and five “sell” ratings from analysts. The consensus price target of $221.11.

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Weak manufacturing led to a decline in markets

However, despite Apple stock growth, the momentum fizzled out after the ISM manufacturing index for September came in at its weakest level in 10 years. The decline in broader markets weighed on Apple as well. The dismal data stoked concerns about an imminent recession in the US and spooked investors.

While the market was already reeling under disappointing manufacturing numbers, the US service sector data came as another cruel blow. On Thursday, the Institute for Supply Management’s services sector index dropped to 52.6 in September from 56.4 in August. Investors were jittery and pulled down the stock market.

Third-quarter sees a slowdown

Meanwhile, the Atlanta Fed’s GDPNow model estimated the US economic growth by just 1.8% in the third quarter. The projected rate of growth is lower from the previous reading of 2.1%. The Boston Fed President Eric Rosengren also spoke on similar lines. In an interview with CNBC, he revealed that he foresees only a 1.7% growth in the second half of 2019. The dire economic situation also raised hopes of another rate cut by the Fed.

The weak services and manufacturing data, coupled with uncertainty about the trade wars, created panic in the market. In the first two days of October, the Dow lost more than 800 points. On Wednesday, Apple stock lost 2.4% and fell 1.7% on Thursday.

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All is well for Apple stock

The tide turned on Friday, and Apple posted an intraday gain of 2.8%. Apple stock jumped amid reports by Nikkei that the company increased the production of iPhone 11 by an additional 8 million units. Nikkei further stated that the recent surge in iPhone orders is led by the cheapest iPhone 11 model and the iPhone 11 Pro.

Also, the stock mirrored the buoyant market sentiment after the September jobs report revealed that 136,000 jobs were added in the US last month. The numbers brought the unemployment rate to a 50-year low of 3.5%.

Apple’s gradual shift to affordable iPhones

Apple’s strategy for iPhones is evident now. It wants to primarily lure budget smartphone owners with cheaper versions of the iPhone. The company hasn’t yet raised the price of the iPhone 11 from $699. Meanwhile, Apple analyst Ming-Chi Kuo indicated that the company would launch a smaller, cheaper iPhone that’s just as powerful as iPhone 11.

He expects this version will be called as iPhone SE2, which the company will launch in Q1 2020. Ming-Chi Kuo further added that as Apple currently sells the iPhone 8 for $449, the iPhone SE2 may be available for $50 less. Clearly, the company wants a turnaround in its iPhone segment and an uptick in Apple stock.

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Apple CEO goes cheaper, hopes for higher Apple stock

Earlier, Tim Cook wasn’t too keen on pushing iPhones into the affordable segment. In 2016, the Apple CEO said, “We’re about making the best. That means we’re not going to play in some of these other price points. I don’t want to be in those markets. I don’t have a desire to be in those.”

However, things have gradually changed. Apple seems to have realized the importance of “those markets.” It now wants to cater to the affordable segment to revive the flagging iPhone sales and Apple stock. Therefore, Apple launched the iPhone 11 and now the upcoming iPhone SE2.

Tech giant sets itself up for a winning fourth quarter

The upbeat projections of the analysts also indicate that Apple stock is on the right track. It is only in the next quarter that we will be able to understand the impact of surging iPhone demand on the company’s top line. Until then, we can only speculate.

I believe the Apple stock is poised for better times ahead. However, the next few weeks are crucial in deciding the fate of the company.  Now all eyes are on the fourth-quarter results, which investors are waiting for with bated breath.

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