Lines of people snaking around the corner from the Apple (AAPL) store like they were queueing up for a Beatles concert in the '60s is great for Apple's stock. Even if the numbers suggest iPhone-mania is on the decline, the footage making the rounds on the news suggests otherwise. (Apple is a key holding of the Action Alerts PLUS charitable trust.)
Apple bulls were back in the saddle this week, pushing the stock up nearly 12% in anticipation of Friday's iPhone7 release. That anticipation was bolstered by reports from carriers like T-Mobile (TMUS) saying it set a single-day smartphone sales record. Meanwhile, Sprint (S) reported that iPhone 7 pre-orders were four times stronger than for the previous iPhone release last year.
The strong early showing from Apple has resulted in analysts across the industry upgrading their outlook on the company. The upgrades come at a time when the difference between Apple's price target and actual stock price are closer than they have been in at least a year (see chart).
The second and third quarters of fiscal 2016 were the first times Apple reported a decline in iPhone sales since the device became culturally iconic. Many consumers balked at the fact that the iPhone 6s was not different enough from the iPhone 6 to necessitate an upgrade, leaving Apple with an underwhelmed consumer base. But the buzz surrounding the iPhone 7 could carry Apple to the iPhone sales growth it is familiar with.
"The off-cycle iPhone is always a worse performer than the new-cycle phone. They are less successful because they tend to not have as big an update. The iPhone 6s, for example, didn't really add much compared to the iPhone 6," Action Alerts PLUS senior analyst Scott Berman said.
Real Money chartist Bruce Kamich believes Apple's chart shows signs of being ready to break out soon based on the fact that the stock's rise has been accompanied with a matching rise in trading volume.
"A trade at $112 will be a triple-top breakout, in my opinion, and give us an upside price target of $138 (counting the columns across and projecting it upward). Investors always need to understand risk and this chart says that a decline to $104 will turn this chart negative," Kamich wrote.
The iPhone is still cool, residing in a space in pop culture similar to Nike's (NKE) Jordan brand where, yeah, there are other shoes that look better, function better and are cheaper, but they aren't Jordans.
Apple plays up the distinction of its brand of phones and the rest of the market, making some of its more popular features, like FaceTime, exclusive to their phones. Getting a text from someone who doesn't have an iPhone turns their text green.
Add to that the fact that the iPhone's closest competitor, Samsung, is literally crashing and burning amid a massive recall, and the iPhone 7 appears prepped to solidify its place at the top.