Market Insider

As Apple's stock hits new highs, analysts like it less and less

Key Points
  • Apple is hitting new highs, yet the number of buy ratings on the stock from Wall Street analysts is the lowest since 2009.
  • Strategas, which tracks the ratings, says this is a positive, as the stock has momentum and Wall Street's lack of love is actually a contrarian signal.
Apple is most underappreciated stock in the world, says analyst

Some of Wall Street's research analysts are snubbing Apple just as it sets new highs, and that could be a very good thing.

Apple shares were just slightly lower Wednesday after hitting an all-time high Tuesday, at a time when the number of Wall Street buy ratings on the stock are at a decade low.

"It means you want to own the stock. What we've seen historically is when you have good stocks making new highs, and analysts are downgrading them, it's often a sign of future strength to come," said Chris Verrone, head of technical strategy at Strategas Research. "The analysts are missing it. It reminds us of Microsoft in ... 2013 when the stock was just starting to work again, and analysts couldn't get their head around it."

Verrone said he tracks ratings by Wall Street research analysts and watches the trend as a potential momentum indicator. For instance, right after the 2016 election, J.P. Morgan Chase stock was starting to rally, but analysts kept downgrading it. At the time, it was trading around $68.

Now, shares of J.P. Morgan are at $110. "It seems to work when you get the Street on the wrong side, and when a stock starts to show momentum, you want to own it," he said.

Apple stock has taken its knocks this year, with many concerned about iPhone sales. Heading into its last earnings report, sentiment on the stock was downright grim. But Apple surprised to the upside with beats on earnings and revenues, even though iPhone sales fell short of forecasts.

According to Street Account, recent analyst actions on Apple are mixed. It was downgraded to hold from buy by Maxim on May 30. UBS on June 1 raised its target to $210 and retained its buy rating. Morgan Stanley also raised its target, to $214, on May 24 and remained overweight. The stock was dropped from Citigroup's focus list on May 2, and New Street Research initiated coverage with a market perform on May 4.

"Apple is the least-loved trillion-dollar stock we've ever seen. We say it as a joke, but it's true," said Verrone. "Basically, people were downgrading their assessment of the stock. We think that's a mistake. Don't fear strength."

Apple hit a high of $193.94 Tuesday, and its market cap is just under $950 billion. Apple once had been Wall Street's favorite stock.

Verrone said when the mob loves a stock, it also can be a warning, but a negative one.

'When you see a very, very high degree of buy ratings by analysts, it doesn't matter empirically until the stock starts to roll over. ... We think of it as a momentum indicator," he said.