TheStreet’s and host of CNBC’s Mad Money Jim Cramer weighed in on several important topics in the morning of March 30. In addition to Friday’s upcoming jobs report and the “rob Peter to pay Paul” dynamic on Wall Street, Jim did not forget to address Apple stock.
Below are a few of his key comments regarding the Cupertino company’s shares, followed by my commentary on each of them.
Jim Cramer on Apple
“What is not coming back is Apple. The component shortage is hurting it. I think Apple goes lower because the numbers may be too high, […] but you have to take a longer-term view.”
Indeed, Apple stock has been spinning its wheels. The chart below shows that, since around the time of the 4-to-1 stock split, shares have merely bounced around aimlessly. In the meantime, the S&P 500 has climbed a solid 18%.
Recently, I listed 3 key reasons behind the lack of share price traction that Jim Cramer has referred to:
- Apple was “too hot” entering 2021, after excellent performance in 2019 and 2020, and the stock likely needed a breather;
- Now that economies will go from dormant to reopened very quickly, cyclical stocks should perform best, to the detriment of growth and stay-at-home stocks like Apple;
- Apple’s smartphone production could drop from previously planned levels, primarily due to soft iPhone 12 mini sales.
Things have gotten worse for Apple on March 30, when Foxconn reported supply chain issues that could disrupt production of Apple’s devices through 2022. For this reason and the others listed above, I agree with Jim Cramer that Apple could very well head lower from $120 per share.
At the same time, I also agree that a longer-term perspective is needed on Apple. It is unlikely that potential Apple investors will be able to hit the bullseye and buy shares exactly at the stock price’s lowest point.
Therefore, buying Apple at reasonable levels and waiting for the stock to climb over a multi-year period seems like the best course of action, in my opinion. I believe that a share price of $120 or less should catch investors’ attention.
Jim Cramer on tech stocks
“Look for opportunities, particularly in the Nasdaq, because interest rates may actually be tamer than people realize.”
Jim’s statement above can be broken down into two pieces:
- The rise in yields could take a pause;
- The Nasdaq has been discounted too severely due to the recent increase in rates.
The first argument is certainly debatable. In a year of economic recovery and lavish liquidity in the system, the natural state of interest rates is to move higher. Fighting the increase in yields in 2021 could prove to be a very frustrating exercise.
On the second point, I can certainly see the case for buying high-quality Nasdaq stocks on the dip. However, for the move to pan out, I believe investors need to be patient and maintain a long-term perspective. Between now and the time that tech and growth stocks justify the investment, investors can still experience quite a bit of pain.
Jim Cramer on market indecisiveness
“I want this market to have a lasting theme, and it can’t get it. Yesterday, everybody liked FANG. Now, everybody hates FANG. Give me a break!”
This is an interesting observation. In March, Apple witnessed roughly as many down as up days in the market. The only three-day stretch of share price gains, albeit modest ones, happened late in the month. The short-lived momentum was then squashed by two consecutive days of returns below -1%.
The pinball-like behavior in Apple and tech stocks in general has been very much aligned with my observations about volatility. During periods of corrections from the peak, such as the one that Apple stock is currently undergoing, share price jitters are to be expected.
The graph below shows how, in March, Apple shares underwent a period of high volatility, the most since the US Presidential election and the announcement of the first COVID-19 vaccines.
Short-term pain, long-term gain? This could be one way to approach AAPL stock today. What is your opinion? Check out the Twitter poll below.
Explore more data and graphs
The first graph used in this report was provided by Stock Rover. I have been impressed with the breadth and depth of information on markets, stocks and ETFs that this platform provides. Stock Rover also helps to set up detailed filters, track custom portfolios and measure their performance relative to a number of benchmarks.
To learn more, check out stockrover.com and get started for as low as $7.99 a month. The premium plus plan that I have will give you access to all the information that went into my analysis and much more.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)