A top Wall Street analyst thinks Apple's stock (AAPL) is at risk of an earnings day sell-off, which would ultimately be a buying opportunity.
"Apple shares are up 19% since the October 4 low (vs. 5% for the S&P 500) suggesting December quarter upside is largely priced in," warned Morgan Stanley tech analyst Katy Huberty in a new research note Thursday. Huberty expects Apple to report a better than expected quarter on Jan. 27, and guide to a relatively in line March quarter.
If the stock falls on the results — which would extend a 9% slide year-to-date — Huberty believes it would be a good entry point into Apple given several key elements.
The analyst views Apple "as a more defensive/quality outperformer in challenging markets given a 1.65 billion plus installed base with high loyalty/retention rates, underweight institutional positioning, strong capital returns, and the tendency for Apple to outperform ahead of product cycles (iPhone SE3 in April/May 2022, iPhone 14 in Fall 2022, and a MR Headset in 2023)."
Huberty rates Apple shares at an Overweight, or the equivalent of a Buy with a $200 price target.
Apple shares currently trade at $169 on Thursday.
Despite its impressive fundamentals, Apple's stock has been swept up into the selling in big-cap tech names ahead of rate hikes from the Federal Reserve.
The Nasdaq Composite fell into correction territory on Wednesday, otherwise known as a decline of 10% or more from a recent high. High multiple tech stocks besides Apple continue to be under severe pressure, notably fintech player Block (formerly Square) which is hovering around a 52-week low. Shares of Roku have crashed 52% in the past three months.
Other pros on the Street think one should be poised to pounce on Apple soon.
"So many times Apple is seen as a defensive stock. We noticed that over the last maybe six weeks when a lot of other tech names were down, Apple continued to do well. If you don't have it in your portfolio — we are longer-term investors — wait for that pullback and add some of that to your holdings for more of the base holding in your portfolio," Crossmark Global Investments chief markets strategist Victoria Fernandez said on Yahoo Finance Live.