Bearish Analysts Could Prompt the Next Apple Stock Rally

It's surprising how much bearish sentiment still surrounds Apple

Josh Selway
May 17, 2018 at 10:19 AM
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Apple Inc. (NASDAQ:AAPL) blew up a lot of bear cases a few weeks back by posting better-than-expected quarterly results, and the stock continued to rally in the days that followed thanks to Warren Buffett's upbeat outlook. AAPL eventually hit a record high of $190.37 a week ago, and was last seen just below this mark at $187.48, bringing its year-to-date gain to nearly 11%. But while it may seen prospective options traders may have missed the Apple breakout, data suggests the iPhone maker could still be a strong target for call buyers.

Specifically, the security showed up on a list of names that have outperformed on the charts, yet have low volatility premiums for near-term options, measured by our Schaeffer's Volatility Index (SVI). This indicator for AAPL comes in at 18%, and ranks in just the 15th annual percentile. Said simply, it could be a good time to buy short-term options contracts.

According to Schaeffer's Senior Quantitative Analyst Rocky White, Apple has been in a similar position three other times since 2008, meaning it was trading near its 52-week high and had a low SVI. Looking at one-month returns after such "signals," the shares ended positive twice.

And although it would seem the tech giant has at least momentarily put fears of slowing iPhone growth to rest, there are a tony of Apple skeptics still hanging around. Most notably, almost half the analysts covering the stock have "hold" or "sell" ratings, and the average price target is just $195.96 -- a measly 4.4% premium to current levels. Considering all this, we could see more bullish brokerage notes come through and drive the equity even higher.

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