Apple (NASDAQ:AAPL), like other tech stocks, has bounced back in recent weeks. This is largely due to growing speculation that the Federal Reserve will cut interest rates in 2023 in order to minimize the impact of a recession. Lower interest rates are a positive for growth-oriented names like AAPL stock. Lower rates increase the present value of future earnings.
It’s too early to say that rate cuts next year are a done deal. That’s why some commentators are suggesting that selling into strength is the move to make with Apple shares. Further developments could signal the Fed plans to remain hawkish for as long as it takes to fight high inflation. This may result in another tech selloff.
So, is cashing out the best move? Not so fast.
Buy and hold remains the better course of action here.
AAPL Stock: Why You Shouldn’t Cash Out Now
It’s tempting to try to time the market, but it’s easier said than done. In fact, it’s nearly impossible, even for Wall Street pros. Plenty have tried to predict short-term price movements only to find themselves buying high and selling low. In turn, they miss out on the bulk of a stock’s gains.
That’s the key risk you take by selling AAPL stock today while external uncertainties continue. Cashing out today, and waiting things out until there’s another big pullback, may on paper seem like a foolproof strategy. Yet just as it’s far from a lock that relief for growth stocks is just around the corner, it’s also not set in stone that another big selloff looms for tech stocks.
Put simply, if you are bullish on Apple in the long term, don’t cash out in the hopes you can re-enter at a lower price. The opportunity may not arrive. Instead of pulling back, the rally could carry on.
There’s no reason to waste effort and energy trying to trade around this stock. Instead, a set it and forget approach is the more fruitful path to potential profits.
Apple Has Ample Long-Term Runway
What do I mean when I say set it and forget it with AAPL stock? If you already own it, hold onto your position. If you don’t own it yet, lock down a position at current market prices instead of sitting on the sidelines until it falls back to its 52-week low. Splitting hairs over entry price makes little sense.
Why? It’s likely that the bulk of Apple’s gains from here will arrive steadily in the years ahead. Shares stand to move higher when the macroeconomic worries that are holding it back today clear up. From this factor alone, the stock could make its way to prices at or near $200 per share. On a longer timeframe, company-specific catalysts could catapult it to even higher prices.
For instance, a pivot toward making more of the tech giant’s revenue subscription-based will help. Per one sell-side analyst, achieving this could add another $1 trillion to Apple’s already multitrillion-dollar market capitalization.
Its driverless electric car catalyst, another potential needle-mover, is still in motion as well. Don’t forget either that there’s the metaverse, where Apple can level up on its past success.
Currently, AAPL stock earns a B rating in my Portfolio Grader. It’s unclear whether shares will continue to rebound in the near term. Even so, investors holding this stock today, or looking to add it to their portfolios, shouldn’t let near-term volatility get in the way of long-term appreciation.
Gains from here may arrive gradually, but runway is ample. Despite already sporting a valuation in the trillions, it hasn’t hit a growth wall.
Moving toward more of a subscription-based revenue model could produce significant shareholder value. Its move into self-driving electric cars and the metaverse could materially increase the company’s value as well.
There are multiple factors giving it a strong chance of retaking its past high and soaring to even higher prices. Don’t cash out or sit out on AAPL stock today. Holding it as a long-term position is the better move.
— Louis Navellier and the InvestorPlace Research StaffRetire Early With $3 Wonder Stock? [sponsor]
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Source: Investor Place