Apple at $497.48: Look who’s NOT underwater now

The fourth record high in as many days pushes three more analysts underwater. And then there were two.

Below: My full list of Apple price targets, as accurate and up-to-date* as I can make it. Corrections appreciated.

apple intraday high 8-21

Click to enlarge. I rely on *TipRanks ($) for the estimates of an analyst who shall remain nameless (long story).

My take: Biden bump? Short squeeze? Loading up for the stock split? Feels short-lived.

UPDATED to reflect Friday’s closing price. The intraday high, $499.47, came within 53 cents of a nice round number.

35 Comments

  1. Paul Brindze said:
    My $125 ($500 pre-split) for Aug 31 not yet underwater … but I am getting my scuba gear ready. 🙂

    I think the Stock Split is biggest driver.

    3
    August 21, 2020
    • Gregg Thurman said:
      I think the Stock Split is biggest driver.

      I agree and believe that pressure disappears come Monday’s Open.

      @Fred. Also Robin Hood doesn’t pay interest on your idle cash instead earns interest (for Robin Hood’s benefit) on it. That’s the cost to the account holder for not paying trading fees.

      1
      August 21, 2020
      • Aaron Belich said:
        RH pays interest on idle cash, has for a few months now.

        0
        August 21, 2020
        • Bart Yee said:
          @Aaron Belich Likely, like all “banks” connected to brokers, they pay a smaller interest to account holders than they can make with the money. All banks and financial institutions (Insurance companies, annuity companies, etc.) do this, IMO. All financial contracts are written to benefit the company doing the underwriting FIRST, and then the consumer / user gets their “benefit”. Always has been this way, that’s the way the company get its fees, commissions, income revenue stream from the account holders, especially the firms that now offer no commission trading – they get other fee based services, advising, or account management fees.

          0
          August 21, 2020
      • Jerry Doyle said:
        @Gregg Thurman: This week’s stock price run-up has nothing to do with getting in “pre-split.” Anyone wanting in for the stock price run-up pre-split missed out long ago.

        The stock price was approximately $378 on July 30th 4:1 split announcement. In after-hours trading, it now is approximately $498. That is a stock price run-up of $120. 120/4= $30. A 4:1 split “now” gives a $124.50 per share. (The stock likely continues higher to 08/30).

        Those folk who bought in on the next day after the announcement capitalized on the full $120 making their post-split share price $94.50, instead of $124.50.

        Normally, there is a 3-7% pop after a split, sometimes more, even as high as 11%. I do not expect us to see much of a pop post-split due to fractionalized trading and because Apple already is a widely held stock. Those who want to own Apple most likely already do own Apple.

        If we see a pop in the stock price post-split, I believe it will be modest, at best.

        The time to jump-in was the day following the Earnings Call announcement of the split.

        If one lacked the liquidity to do so at that period, then one could have taken a short-term loan on the expected dividends and use that amount to buy more shares early on to reap the full stock price run-up.

        1
        August 21, 2020
  2. Fred Stein said:
    Yes Philip, all of the above plus FOMO.

    Also today’s WJS: Robinhood and other trading Apps, make trading easier and add cues to drive trading activity.

    Little secret: Robinhood gets PAID by the market maker for order flow. That’s how they make money.

    3
    August 21, 2020
  3. Fred Stein said:
    Private theory about bubbles:

    Fundamental economics drives asset prices up. This brings in ‘followers’. Even naive followers, if early, do well. This creates ‘momentum’ bringing in late followers taking the asset to unsustainable prices.

    When the assets ‘correct’ to remove the excess, the followers, sometimes push assets even lower to over-correction.

    In the past we’ve seen over-corrections with AAPL. I suspect the over-correction days won’t re-occur, for AAPL, because of anti-fragile.

    5
    August 21, 2020
  4. Rodney Avilla said:
    Apple P/E of 37
    1. Speculators.
    2. ‘Tesla’ affect.
    3. Late comers jumping on the bandwagon
    4. New comers jumping on the bandwagon
    5. A slipped internal memo regarding shipments of 5G to mars
    6. The ‘Inner Circle’ decided on a P/E of 45
    7. A safe haven tech stock.
    8. Naive followers (Thanks Fred)
    9. Pre split
    10. 5G / VR / AR / etc
    11. The Street had subscribed to Ped30
    12. Shorting aapl options (watch for the 12:45 effect)

    8
    August 21, 2020
    • Gregg Thurman said:
      6. The ‘Inner Circle’ decided on a P/E of 45

      6. The ‘Inner Circle’ decided on a valuation that resulted in a P/E of 45.

      I’ve of the opinion that Investor Sentiment dictates PE. That’s why when I’m referring to “PE” I call it ISM(Multiple).

      5
      August 21, 2020
      • Jonny Tilney said:
        Actually, that’s really cool Gregg. I like it. I like it a lot!

        0
        August 22, 2020
  5. Kirk DeBernardi said:
    On the subject of being underwater —

    When COVID exploded late ‘19, early ‘20 and everyone and everything was trying to find their ass with both hands, I was telling coworkers that I’d be simply content if Apple was at some kind of 300 by the close of 2020.

    I guess I’m following Warren Buffett‘s advice for happiness — “To be happy, set your expectations low.”

    …or something to that effect.

    4
    August 21, 2020
    • David Emery said:
      The Buffett strategy quote has me worried:

      “Be cautious when others are greedy. Be greedy when others are cautious.”

      2
      August 21, 2020
  6. David Baraff said:
    In the official taxonomy we use to describe price action, what’s the level immediately above “batshit crazy?”

    Actually, as for (12) on @Rodney’s list, that would apply to me except I bailed out of that 2 weeks, when we were at $442. Thank god! So, yeah, maybe because today is monthly expirations, others who weren’t as lucky, are getting totally screwed right now!

    3
    August 21, 2020
    • Kirk DeBernardi said:
      @ David Baraff —

      Sublimely BatShit Crazy.

      5
      August 21, 2020
  7. Bart Yee said:
    Amazing, I was going to post it was up $20, knocking on $493, but now it’s broke the door down up $25.4 knocking on $498.50!!

    Today’s run has continued to intensify, IMO, in part because of the expirations and also because it continues past the 1:00pm lunch time return swoon that many time accompanies upward price moves. I think the big boys have decided to get out of the way till the last 40 min. while the short squeeze, options, and last minute FOMO traders have run. We’ll see if any drop occurs or those hangin on against hope for a drop capitulate and propel maybe to $500??

    1
    August 21, 2020
  8. John Konopka said:
    Looks like we hit resistance at $499.

    1
    August 21, 2020
    • Romeo A Esparrago Jr said:
      Resistance is futile LOL

      7
      August 21, 2020
    • Bart Yee said:
      @John Konopka Closed at $497.48, up +$24.38. I saw comments elsewhere that resistance occurred at $499 due to lots of contracts at $500 would be at huge risk to be triggered, so there was downward pressure applied when it approached $499. Can anyone help explain that theory better?

      1
      August 21, 2020
      • David Emery said:
        I’m interested in understanding the mechanisms to control the stock price, i.e. who and what applies this pressure to keep the price under $500.

        0
        August 21, 2020
        • Paul Brindze said:
          @David Emery

          Here is one “non-manipulator “ version of resistance at option prices:

          You are a hedge fund. You sold calls at 500. But since you are hedging, you bought shares to offset that sale. As the price approaches 500, you want to close out your call position, so you don’t get caught having to make good on them. You must buy back the calls you wrote, causing you to sell the offsetting stock you bought .. putting downward pressure on the stock as it approaches the option price.

          Multiply by lots of calls and stock because hedge funds can be big players.

          3
          August 21, 2020
        • Bart Yee said:
          @David I would postulate that those who could lose big on $500 contracts could inject AAPL stock for sale offered at below $499 prices to try to drive the stock price down. One can set the price they wish to sell at and see if there is demand for it at that price, both above and below the current market price.

          It may be that selling stock below $500 would save more money than having to buy stock at $500, especially if you have bet the stock would already go down? Since I don’t have a very good understanding of options (which is probably what’s happening here?), I’m pretty sure there’s a number of possible scenarios. @Gregg Thurman or @Mordechai Beizer @Paul Brindze could help explain?

          2
          August 21, 2020
        • John Konopka said:
          @David Emery
          You can try reading about Max Pain for thoughts about the price of the stock and the open options contracts.

          Here is one link:
          https://www.investopedia.com/terms/m/maxpain.asp

          There is a lot of discussion about the possible pull of open options contracts on the price of a stock.

          2
          August 21, 2020
  9. Bart Yee said:
    I wonder if there will be some selling pressure from passive Dow Index funds after the split?

    That may be offset due to Dow index funds possibly needing to actually decrease the amount of Apple (or increase all other Dow stocks they own) that they have due to the split. Why? The Dow is price weighted and Apple goes from 11% (#1) of the Dow down to 3% (#16) in relative weighting by price.

    Quote from CNBC article on Apple split effects:
    “For example, the SPDR Dow Jones Industrial Average ETF Trust (DIA), which has more than $23 billion in assets under management, tracks the old-fashioned average. Managers of these passive funds will have to buy shares in the rest of the index’s companies to fit the big hole from their Apple sales post the split.

    “It’s a four-for-one on the biggest stock you have,” Silverblatt of S&P Dow Jones Indices, told CNBC. “If you own the fund, you had 11% of your money with Apple. All of a sudden, you are only in the 3%; you’ve got a heck of a lot to sell.” ”

    “Vanguard, Berkshire Hathaway, BlackRock, State Street and Fidelity are by far the biggest investors in Apple, collectively owning about $800 billion worth of the stock, according to FactSet.” Most of these Institutions own AAPL in non-passive funds although one can argue Vanguard and Berkshire rarely trade AAPL but rather buy and hold.

    3
    August 21, 2020
    • Paul Brindze said:
      @ Bart Yee,

      The point of the article… very little is in Dow indexed EFT. No Dow indexed mutual funds. No big effect on AAPL price from this.

      Bigger question is will the influx of small retailer investors, and psychological effect of “low price” be enough to boost the price. History on splits is bump up on day one, followed by a dip. But past is no guarantee of future performance, etc. etc.

      2
      August 22, 2020
  10. Bart Yee said:
    Volume today was 81,892,259, over double the 36.8M 30 day avg. Literally an avalanche or tsunami of trading today. Next 2 weeks will be very interesting as the split is digested by index funds, institutions and retail investors as well as speculators. Interesting to note that 0.62% of the float was short interest as of July 31, 2020, about 26.5M shares worth. I suspect short interest may actually go up by Aug. 31(share numbers increasing mathematically by a factor of 4 for the split but percentage wise the same) because “AAPL shares can’t possibly keep going up from here, its so overvalued”. Maybe so, but for some AAPL is now fairly valued.

    3
    August 21, 2020
  11. Bart Yee said:
    For the current quarter’s earnings estimates, since AAPL gave no guidance, will this put upward pressure on analysts’ estimates in order to justify the multiple expansion? Will they use a ho-hum or slight improvement YOY to justify their pessimistic or underwater projections? Will the drag of the App Store controversies cause profit taking?

    Or will the investment community give Apple another pass for this quarter and focus squarely on the holiday quarter and new iPhones, Watch, iPads introductions? Frankly, again, and maybe even for the next year or longer, perhaps Apple should not give guidance at all – it hasn’t seemed to affect its business and leaves analysts to create the earnings narratives, not Apple setting its own benchmarks (at least externally). Or will the “whisper” numbers make a return to satisfy the new investors who have now come on board?

    2
    August 21, 2020
  12. John Konopka said:
    I wonder if we are seeing some sort of seismic shift in industry? Look at the chart in this article.

    https://www.motherjones.com/kevin-drum/2020/08/why-is-the-stock-market-booming-or-is-it/

    It shows that, minus tech, the market has been flat for two years.

    When the iPhone first came out a manage asked me if the iPhone could find a place in business. Now you can’t imagine business without it. Of course, the iPhone of today is vastly improved from the original.

    More importantly, it is now a platform (with the Watch and iPad). Almost all new technology will become a feature in this platform. Maybe the big money has realized that Apple is no longer just a producer of interesting gadgets but has become the backbone of our lives. As the iPhone becomes more capable this position becomes more powerful. Perhaps the pandemic is just a coincidence or a slight accelerant to this realization.

    5
    August 22, 2020
    • Jonny Tilney said:
      Bingo. Put another way, the dimbats in banking institutions (that were proudly light on AAPL) woke up to what PED’s army have been saying for years!

      4
      August 22, 2020
  13. Romeo A Esparrago Jr said:
    Monday Aug 24, 2020.
    Almost high noon here in Texas.
    I am squirming to see this updated again!!!

    1
    August 24, 2020

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