The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

AAPL Stock Prediction

Summary:

Warren Buffett’s Berkshire Hathaway owns around 135 million shares of Apple. Berkshire’s bet on Apple just appreciated more than $1 billion in one day after Apple’s earnings report.

Apple’s market valuation rose by $48.1 billion after it stock price shot up post-earnings. Apple’s valuation is now more than $819 billion.

My fearless forecast is that as long as Warren Buffett stays long AAPL, the stock could hit $165 before 2017 ends. There is resilient demand for iPhones.

Buffett’s faith in Apple is a shield against those sell-side analysts pessimistic over the rumored delay in iPhone 8 production.

AAPL has negative short and intermediate-term algorithmic forecasts. However, I Know First has a very bullish one-year algorithmic prediction for AAPL.

Apple (AAPL) saw its stock rose by almost 5% the day after it reported its Q3 earnings last August 1. Apple delivered better than expected EPS and revenue numbers. Apple’s Q3 EPS of $1.67 beats by $0.10 and Q3 revenue of $45.4 billion (up 7.2% Y/Y), beats by $510 million. The post-earnings bullish reaction which saw Apple’s valuation rose by $48.1 billion on August 2 is a validation of Warren Buffett’s big $18 billion bet on Apple.

I discussed last May 2016 why Buffett went long AAPL. His bet has since appreciated by more than 65%.

(Source: Google Finance)

AAPL’s stock price 4.73% on August 2 because everybody appreciated the company’s stellar improvements on other metrics. Below is a list of the best things of Apple’s Q3 FY 2017 performance. I am very surprised that the supposedly dying iPad product line actually delivered +15% Y/Y unit sales and +2% in revenue. It goes to show that Apple is now using my old suggestion that it must expand beyond its old high-margin-only policy.

Other Q3 2017 Highlights

Gross margin of 38.51%, up from 38.02% iPhone unit sales up 2%, revenue up 3% iPad unit sales up 15%, revenue up 2% Mac sales up 1%, revenue up 7% Services revenue up 22% Other products revenue up 23%

I am also very impressed that Services and Other Products are up 22% and 23% respectively. Apple is obviously the biggest beneficiary of the surging revenue from mobile games/apps. It should also be noted that iPhone unit sales was up 2% and revenue was up 3%. There’s a resilient demand for iPhones. The iPhone 7 and iPhone 7 Plus are still attractive in spite of the forthcoming release of the iPhone 8 models later this year.

Bet Like Buffett

Buffett’s Berkshire Hathaway (BRK.A) owns around 135 million AAPL shares. His AAPL bet just appreciated more than a $1 billion in one day after the stock shot up post-Q3 earnings report. The moral lesson of this article is that you should always be patient when it comes to Apple. The stock traded sideways below $150 for most of July and many people were worried that the waiting game for the iPhone 8 is going to hurt Q3 iPhone sales. Buffett knew the iPhone has a wide moat and a massive number of loyalists.

Investors felt that Apple won’t be able to meet the estimated 40.7 million unit sales of the iPhone because customers are holding-out for the iPhone 8. However, Apple reported that it actually sold 41 million iPhones in Q3 FY 2017. The iPhone’s average selling price (ASP) is $605.62, slightly higher than last year’s ASP of $595.26.

Apple sold 50.76 million iPhones in Q2. However, the 41 million iPhones sold in Q3 2017 is still 2% Y/Y.

For many years now, I’ve been proclaiming that AAPL’s performance will always dip and soar according to its quarterly iPhone sales. AAPL soared yesterday because Q3 FY 2017 delivered better-than-predicted iPhone unit sales. The upcoming release of the iPhone 8 model will likely help Apple achieve 78 million unit sales during the December quarter. By January or February 2017, I expect AAPL to post a new 52-week high. I see AAPL breaching $160 by early February next year.

Conclusion

As long as Buffett keeps holding on to 135 million shares, AAPL is strongly shielded from any bad propaganda made by sell-side analysts/investors. Buffett’s reputation for finding undervalued, high quality companies guarantees Apple’s positive stock trend for this year. No hedge fund is going to aggressively short AAPL when Berkshire Hathaway is heavily invested on it. Apple also ended Q3 2017 with more than $260 billion in cash.

My fearless forecast is that AAPL could breach the $165 price level before 2017 ends. In spite of the reported production delay over all iPhone 8 models, there really is a resilient demand for them. Apple’s loyal customers will wait for them. The long-term, maybe for-life loyalty/commitment of iPhone users is Apple’s great moat that made Buffett go long on its stock. As long as there are 40 to 79 million people around the world that keeps buying the latest iPhone, Apple is a rock-solid long-term investment.

I rate AAPL as a buy. This stock has negative short and intermediate-term algorithmic forecasts. However, I Know First’s self-learning algorithm touts a bullish one-year forecast for Apple.

Analysis of technical indicators and moving averages trend also supports my go-long endorsement for AAPL.

(Source: Investing.com)

Past I Know First Forecast Success with AAPL

I Know First has made accurate predictions on AAPL in the past, such as its bullish article published on September 18, 2016. In the article, it explains the features of the iPhone 7, predicting its success. Within a 10 month time period, AAPL shares increased by 35.18% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: AAPL)

This bullish forecast for NTDOY was sent to I Know First subscribers on September 16, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.