To The Moon

Apple stock spun its wheels again in May, dipping over 6%. Could June prove to be a better month for the Cupertino company’s shares? The Apple Maven takes a closer look.

Apple stock moved lower in the month of May by more than 6% – following a post-earnings selloff that “felt wrong”,considering the strong results. Within the FAAMG peer group, only Amazon shares performed worse than AAPL in the most recent month.

It is now time to look ahead. What does historical price action and upcoming catalysts may say about owning Apple stock through the month of June?

Figure 1: AAPL monthly chart.

Apple stock: calendar trends

The following graph depicts Apple stock’s returns relative to the S&P 500’s by month, on average, over the past decade. Here are a few important observations:

• June has not been a good month for AAPL historically. Shares have underperformed the broad market by an average of 1.4%, only trailing the November and December results.
• The better news is that June has also marked a turnaround for shares: Apple stock has lavishly topped the benchmark in July and August over the past 10 years.
• In my view, the narrative that best fits the data is the following: Apple investors become more bullish in the first half of the summer as they anticipate the new iPhone and the start of the holiday shopping season. By November, investors start to lock in gains, and a modest recovery takes place later in the winter. June might merely be a month of few catalysts that usually sets up a mid-year rebound later in the summer.

Figure 2: Average monthly return vs. S&P500 (seasonality).

Apple stock: catalysts

Of course, historical price trends based on the calendar are hardly the most important factor for Apple investors to consider. Catalysts in June could move Apple stock higher or lower. Below is my list of top bullish and bearish factors that might play a role in driving this month’s returns.

First are the bullish factors:

• Apple stock remains stuck in correction land since early May: more than 10% below the peak level of $143 per share. History suggests that buying the dip in AAPL might be a good idea. I believe that, eventually, the market will be ready to pick up Apple shares on the cheaper – and June could very well be the time.
• The legal battle between Apple and Epic Games has only paused, with the judge’s decision expected to be shared in the next few weeks or months. Should the outcome be more favorable to Apple than expected, bearishness over the App Store could dissipate.
• Apple stock continues to rebound off the 150-day moving average (see chart below), suggesting to technical analysts that there seems to be enough demand for shares at around $125. Maintaining the support level may not be a bullish catalyst per se, but could at least serve as encouragement for investors to buy Apple without fearing the downside risk as much.

Figure 2: AAPL 150-day moving average.

Now, the bearish factors:

• The “Epic Battle” mentioned above can serve as both a bullish or a bearish catalyst. While consensus opinions tend to point at an Apple victory, likely with some concessions, the judge’s decision could be overwhelming negative for the Cupertino company as well.
• Meanwhile, yields and inflation continue to dictate the rhythm of the equities markets. Should both remain elevated relative to 2020 or, worse, continue to rise from current levels, AAPL and other growth stocks would most likely get hurt along the way.