Have investors turned sour on Apple?
From a note to clients by Morgan Stanley analyst Katy Huberty that landed in my inbox Thursday evening:
Apple shares are down 7% in the last week, underperforming the S&P 500 by 680bps and the NASDAQ by 440bps. Investors are asking us whether the recent pullback represents a change in the fundamental outlook or investor sentiment.
We believe that the recent pullback in Apple shares is largely a result of overall tech weakness, primarily driven by systematic strategies that appear to have dominated most of the sector unwind, and not a change in investor sentiment towards Apple.
Importantly, over the last 10 years, Apple shares have risen an average of 18% in the 3 months prior to iPhone announcements, outperforming the S&P 500 by over 1500bps and suggesting the recent pullback presents an attractive entry point… We continue to believe that the upcoming iPhone supercycle will drive accelerated upgrades and share gains from other vendors, particularly in China.
Maintain Overweight and $177 price target.
My take: I blame Huberty’s “sector unwind” on Goldman Sachs, which put the spotlight last week on the FAAMG (Facebook, Amazon,Apple, Microsoft, Google), five tech stocks that had gained a combined market value of $660 billion since January and accounted for 40% of the S&P 500 returns.
Here’s Goldman Sachs’ spreadsheet:
Click to enlarge. Not seeing? Try the website.
Below: The sector unwind illustrated by two fever charts
Year to date before the Goldman Sachs FAAMG report, with Apple, Amazon and Alphabet (Google) in the lead.
Five trading days after the FAAMG report, with Apple leading the fall.