BUY, SELL, HOLD (2)

Apple Stock Eyes Fifth Straight Win on Bullish Buffett

Apple is set to wrap up a busy week with a big win

May 4, 2018 at 9:53 AM
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Warren Buffett continues to be bullish on Apple Inc. (NASDAQ:AAPL). In an interview with CNBC, the Oracle of Omaha revealed Berkshire Hathaway (BRK.A) bought another 75 million AAPL shares in the first quarter -- bringing its stake in the iPhone maker to 240.3 million shares, or 4.7%, and making it the second biggest shareholder. Buffett said fretting about short-term iPhone sales is the equivalent of "worrying about the number of BlackBerrys 10 years ago," and that Apple is "an amazing business."

In reaction, AAPL stock is up 1.1% out of the gate to trade at $178.86, on track for a fifth straight gain -- which would mark its longest winning streak since mid-February. What's more, the shares are pacing for their biggest weekly gain since September 2016, thanks in large part to the reaction to Tuesday's blowout earnings report. Longer term, Apple stock has added more than 20% year-over-year.

Despite the stock's short- and long-term technical strength, there is still plenty of pessimism priced into the shares. of the 29 analysts covering Apple, 14 maintain a "hold" or "strong sell" rating. Plus, the average 12-month price target of $195.44 stands at a tepid 9% premium to current trading levels.

Options bears have been piling on at an accelerated pace, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Apple's 10-day put/call volume ratio of 0.79 ranks in the 99th annual percentile, meaning puts have been bought to open relative to calls at a quicker-than-usual clip.

This bearish betting was seen yesterday, with roughly 284,000 puts traded -- 1.5 times the average daily pace. Most active was the weekly 5/4 175-strike put, where it looks like new positions were purchased for a volume-weighted average price of $0.77. If this is the case, breakeven for the put buyers at tonight's close, when the weekly series expires, is $174.23 (strike less premium paid).

 

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