Pros Discuss Apple Stock One Year After Profit Scare

Apple Inc. (NASDAQ: AAPL) caught some investors off-guard in early January 2019 when it revised its revenue guidance lower in reaction to poor iPhone sales and a weakening outlook in China.

Benzinga · 01/06/2020 17:30

Apple Inc. (NASDAQ: AAPL) caught some investors off-guard in early January 2019 when it revised its revenue guidance lower in reaction to poor iPhone sales and a weakening outlook in China. One year later, two pros discussed the contested stock on CNBC.

Apple's 'Really Great Chart'

Blue Line Capital president Bill Baruch said on "Trading Nation" that Apple's stock chart looks "really great," especially when looking beyond just price action and fundamentals.

The average directional index, or ADX, is used to gauge the strength of a trend in either direction. In Apple's case, the ADX peaked in September 2019, but recently broke above a trend line and has room to continue moving higher.

"That's going to pave a path of least resistance higher," he said.

Baruch said he has a price target of $324 on APPLE'S STOCK and sees strong support at around $255 per share. If the stock falls, he said he would consider it a buying opportunity.

Apple's 'Somewhat Stretched' Valuation

Chad Morganlander, portfolio manager at Washington Crossing Advisors, took the opposite side of the trade on "Trading Nation."

The tech sector as a whole outperformed the broader market over the past year and valuations are now "somewhat stretched," he said. 

The technology ETF, Technology Select Sector SPDR Fund (NYSE: XLK), is trading at around a forward-looking P/E multiple of around 22 times versus the S&P 500 index at 18 times forward earnings, Morganlander said. 

"So we would be either neutral to underweight the group." 

Investors can still find some value plays, including Oracle Corporation (NYSE: ORCL) and Cisco Systems, Inc. (NASDAQ: CSCO), the portfolio manager said.

Both of these tech giants are trading at around 11 times enterprise value to EBIT, which is "remarkably cheap based off their expected and embedded growth rates," Morganlander said.

Apple shares were up 0.14% at $297.87 at the time of publication Monday. 

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Photo courtesy of Apple.