Barbara Chouraqui, is a Junior Financial Analyst at I Know First, and enrolled in B.A. in Business at the Institut Superieur de Gestion -ISG, Paris, France.

Apple Stock Forecast

Summary



Apple is criticized for its pace of innovation

Big companies became one of the most important clients of Apple

Despite a tough competition, Samsung is still behind

I Know First Algorithmic Bullish on AAPL

Strengths:

Apple is benefiting from an effective innovation process and a strong ability to renew its products.

The company launched a wide range of products as phones, computers, tablets (iPad), headphones and watches. Their strong brand image is accompanied by a real infatuation for the release of new products, considered as “events”. The brand is consumer-driven and make high profit margins.

Moreover, the brand appeal of the company makes of it one of the only one in its field to be considered as a luxury brand –being offered by the richest Chinese men and women according to the Chinese group Hurun research, beating Hermès and Louis Vuitton.

Customers of Apple are very loyal to the brand.

The direct competitor of Apple is Samsung. However, the Korean telecommunication company encountered some problems related to their last product, the Samsung Galaxy S7. Several explosions of the phone caused by the battery of the devices have been reported. Thus, Samsung had to call its products back. This confirms the position of Apple products as the most secure and reliable products on the market.

The company permanently renews itself. In a constant willing of progress, their next iPhone will have a new design that will improve quality control’s stability while enabling cheaper costs for Apple (Digitimes). The next iPhone could skip the traditional “S” version that follows each release of new phones by Apple and might be the iPhone 10 instead of 8 (Apple Stock News: A Look into iPhone 8).

The company even started to anchor its business into Corporate Social Responsibility –CSR and thus develop harmless solutions. They are also committed to environmental issues, and more particularly in the recycle process.

Finally, Apple is particularly known for being at the cutting edge of technology. Added to a specific design and a leadership position on the market, the strengths of Apple seems infinite.

Weaknesses:

However, prices of Apple products are really expensive compared to its competitors. Its main one is Samsung, using the system of Android. As an example, the iPhone 6 with 16 GB storage was as expensive as the Samsung Galaxy S6 which is enjoying a 32 GB storage. Furthermore, Apple products are not compatible with the products of other brands, but only with the other products of the brand itself.

Apple’s products are distributed through Apple website, Apple stores, electronic shops either physical –Darty, or online –Amazon.com. The exposure to Apple product is pretty low even though their presence on the media seems effective.

Apple has developed a lot of products and used its customers to highly qualitative products. With the technology advances and the rapid renewal of products, the expectations of Apple’s customers became particularly high and meet them is a challenge for the company as well as a weakness. There’s a risk of stagnation for the company and one of its competitors played on it in its last advertising, drawing attention to the stagnation of the market: core products stay the same and there are only incremental changes. Many products have been already developed by the brand and there’s a risk of stagnation.

Opportunities:

That’s why the company should take advantages of the opportunities it has, firstly regarding the diversification of products.

Even though the product portfolio of the company is already well filled, it’s a necessity for the company to keep the attention and the loyalty of its customers by offering them the products they want. The market of connected objects is growing rapidly and is planned to represent 21 billion by 2020 according to the research company Gartner. And the smart watches of Apple received a particularly good welcoming from consumers: they already represent 50% of the market share of smart watches in the US.

One track for Apple could be to develop the watch, but also other connected devices in home automation and sport. Another one could also be to develop its partnerships.

The company encountered many critics regarding its current pace of innovation. However, the brand already enjoys valuable business partnerships with prestigious brands as AT&T –an American telecommunication conglomerate, Foxconn Technology group –world’s largest electronic manufacturer or TPK Holding –world’s largest touch-panel suppliers. According to the New-York Times, Apple’s products are the preferred devices for corporations. Thus, companies represent important customers of Apple (New York Times).

Recently British Airways bought 17,000 iPads for its staff, IBM developed 100 enterprise apps for over 2 000 companies. iPhones and iPads are used by companies because it’s seen as more secure than the system of Android. Among the different qualities of the Apple’s products, its good management of hardware and software is particularly appreciated. With new partnerships, Apple would not only benefit from better exposure; alliances are also a way for them to improve their products both on the management and the security of the devices.

Threats:

Apple does not only have to deal with criticism regarding its pace of innovation. It also faces a certain amount of threats as a really tough competition on its market. They differentiate themselves quite well for the moment and, as stated before, the recent scandal toward the last Samsung should help them to strengthen their leadership position on the market.

Competition is also accompanied by imitation of the company. As an example, Apple filed a lawsuit against Samsung for infringement of design patents. This case was judged by the Supreme court and proves the tension of the market.

Last but not least, Apple has to tackle the rise in labor costs in the countries in which they relocate their plants.

I Know First Algorithmic Bullish on AAPL

I Know First Algorithm has previously predicted AAPL stock movement like in this prediction of a 1 year period from January 3, 2016, until January 3, 2017. The AAPL signal was 135.89 with a predictability of 0.3 which managed to bring returns of 12.71% in one year.

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, allowing the user 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.

Conclusion

Despite the critics and the tough competition Apple had recently to deal with, the company succeeds to impose its brand as a key player in its field. The bullish signal identified by the algorithm is strengthened by different facts. The excitement generated for each release of Apple remains and the news carefully distilled by the company are closely followed by the market.