Why stocks are now undervalued and worth considering

It’s been a fun couple of months for stock the Apple company NASDAQ:AAPL. Traditionally, one of the market leaders you could almost bet on would move in lockstep with the likes Meta platforms NASDAQ: META OR Amazon.com Inc NASDAQ:AMZNthis year has seen the iPhone maker’s fortunes diverge significantly from those of its competitors.

Even compared to the benchmark S&P 500 index, Apple is at a disadvantage, with the former’s 11% gain from the first week of the year now looking very attractive against the latter’s -9% decline. As an example, Amazon is up about 30%, while Meta is in a class of its own with a 50% return this year.

This raises a lot of questions: Why did Apple have such a poor first quarter? Will continue? When does this become too good a buying opportunity to miss?

Perfect storm of negative updates

Well, for starters, let’s consider the obstacles that the company has faced because there have been several. It’s true that Apple managed to capture the initial wave of optimism that swept through shares in November and reached a record high in the first half of December; he has been on the defensive ever since. A fairly consistent series of negative updates have conspired to send investors running for the door and keep them away for now.

The most notable case is the antitrust lawsuit filed against Apple by the US Department of Justice last month, alleging that Apple has “violated the Sherman Act by using its iPhone to prevent other companies from offering competitive services.” Needless to say, Apple is scared and said in a statement that if successful, it would “hinder our ability to create the kind of technology people have come to expect from Apple.”

While the current consensus on Wall Street is that the Justice Department is unlikely to win the case in court and is more likely to result in a fine, it could take years to reach a conclusion. As a new negative headwind, it couldn’t have come at a worse time for Apple stock. App developers in the European Union can now bypass the company’s traditional 30% cut; Apple has thrown in the towel on its electric vehicle project, which CEO Tim Cook once called “the mother of all AI projects,” and there are signs that unit shipments for the iPhone are starting to look like a a little weak.

Opening of purchasing opportunities

But with stocks down 15% from their peak and returning to 2021 levels while the S&P 500 heads for new highs, at what point does this turn into an entry opportunity? Well, there are reasons to believe that Apple stock is already undervalued and headed for a pullback.

Consider this: Apple shares traded last week at $169, which is lower than six of the most recent analyst updates dating back to early March. Morgan Stanley reiterated its Overweight rating on Apple shares in late March and gave the stock a $220 price target. This echoed Wedbush’s Outperform rating that same week, only for the latter to give Apple a $250 price target.

DZ Group and UBS both reiterated their Hold ratings in the final week of March, but maintained their price targets at $180 and $190, respectively. Loop Capital also rated Apple a Hold last week, but with an updated price target of $170.

Considering getting involved

All of this suggests we are approaching or have already broken through the bottom in Apple stock. Barring further negative updates, these updated price targets take into account the impact of all known headwinds Apple is facing. Depending on your appetite for risk and your confidence in Apple’s long-term potential, this might be the point where people say, “The worst-case scenario is already a given.”

Apple is still a beast and on Friday Citi named them a top Buy stock with an estimated 27% return potential. Don’t be surprised if this is just the first of a handful of bullish updates in the coming weeks.

Before you consider Amazon.com, you’ll want to hear this.

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