Why Apple Is Poised for New Record Highs

Apple Inc.’s (AAPL) high-flying stock is up more than 30% so far this year, pushing the company’s market value beyond the never-before reached $1 trillion mark. Despite a relatively steep pullback earlier this month, a number of market analysts think the stock is poised to hit new highs.

Pointing to the stock’s price chart, TradingAnalysis.com founder Todd Gordon sees a rally to $235, telling CNBC’s Trading Nation that “Apple is in a very solid technical position.” Meanwhile, JPMorgan believes the tech giant's transition from being a hardware-oriented company to a services-based one as stimulating ever-stronger growth, with analyst Samik Chatterjee giving Apple a $272 price target, implying 21% upside from Thursday’s close. 

How High Can Apple Soar?

Technical Strength and Fundamental Growth

Having reached an all-time closing high of $228.36 on September 4 before tumbling more than 4% throughout the following week, Apple is already creeping up on that previous record with strong gains in recent days. Gordon’s call for $235, nearly $7 above that recent high, and Chatterjee’s call for $272 are significant considering the already-strong gains and outperformance of the company’s stock this year. (To read more, see: Apple Traders Bet Stock Will Soar to New Record.)

On the technical analysis side, the potential for gains is all in the stock price’s strong uptrend that has, in the past 30 days, shifted into a consolidating trend. But given the support of the upward trend, the stock is now, according to Gordon, “awaiting an end to that consolidation” and will likely lead to a “resumption to the uptrend.” With strong gains over just the past couple of days since Gordon presented his view, the resumption to the uptrend may already be underway.

Apple’s fundamentals are also glowing, as demand for high-end iPhones appears to be higher than Wall Street’s predictions, according to two separate surveys conducted by RBC and Loup Ventures. RBC’s survey revealed that intent to purchase a new iPhone has increased from 20% to 26% since last year, and that 68% of potential buyers are planning to purchase higher-priced models. Although drawing from a much smaller sample size, Loup Ventures found that 70% of 50 customers waiting in line at an Apple store planned to buy the higher-priced XS Max version of the iPhone, in stark contrast to the usual 54% of customers that opt for higher-priced versions.

While higher iPhone sales are good news, Chatterjee emphasizes the iPhone-maker’s transition from hardware to services as being where the real growth story lies. The company’s service sales rose 5 percentage points to 13% of its total revenues between fiscal year 2012 and fiscal year 2017, and Chatterjee expects a continuation of that rise to 20% of revenues by fiscal year 2021. Revenue for fiscal year 2018, which ends at the end of September, are expected to be $264.1 billion, estimated to grow by 6% to $280.2 billion by the end of fiscal year 2019. (To read more, see: Apple Doubles Down on Software and Services.)

All Eyes on Earnings

Investors will be no doubt anticipating Apple’s fiscal Q4 earnings report set to be released on November 1. Given the current expectations for Apple to reach new highs, the outcome of that report could either add momentum to the bull story or, in the case of a big earnings miss, completely deflate the current optimism.