With volatility skyrocketing as the market plunges due to fears about the coronavirus pandemic and the distinct possibility that the global economy could be facing a recession soon, investors are justifiably scared as they watch their retirement accounts and life savings seemingly evaporate. Even Apple (NASDAQ:AAPL), one of the largest and most profitable companies on the planet, isn't immune. The Mac maker had already warned a month ago that it would miss its guidance due to the outbreak.
Considering all of the uncertainty right now, should you sell Apple stock?
Nope -- you should be buying Apple shares
Many stocks in incredible companies are on sale following the recent downturn, including Apple. The company's revenue will undoubtedly take a hit, particularly as it just announced that all Apple Stores outside of China would remain closed "until further notice" as the world tries to contain the disease. That necessary measure will result in lost sales, but Apple is encouraging customers to place online orders and making other accommodations like extending its return policy.
As dire as things feel right now, it's worth remembering that the outbreak's impacts will be short-term in nature. Many Wall Street analysts are recommending that investors scoop up shares while prices remain depressed. This week, analysts at Jefferies and Morgan Stanley have reiterated buy (or equivalent) ratings while adjusting estimates and price targets in response to the crisis. Jefferies cut its share price target from $370 to $320, while Morgan Stanley moved its valuation estimate from $368 to $328. Both targets represent meaningful upside from current levels of around $250.
Moody's credit analyst Raj Joshi also put out a research note this week predicting that demand will rebound swiftly once the world defeats the virus, although demand will remain under pressure in the second quarter. Initially, Apple's supply chain in China was disrupted, but now that the Middle Kingdom is seeing success due to taking extreme quarantine measures, society is slowly but surely returning to some semblance of normalcy. The Cupertino tech giant's challenge now is that demand in other countries is being hurt as the coronavirus spreads in those regions, according to Joshi.
"We believe that Apple should be able to recover a large share of lost sales resulting from the economic impact from coronavirus by the end of fiscal 2020, because a majority of the sales for Apple's most profitable product line, iPhones, are driven by replacements of older versions of the product," Joshi writes.
Note that as a credit analyst, Joshi is evaluating Apple bonds instead of its stock; Moody's rates Apple's paper at Aa1, the second-highest rating behind the coveted Aaa. Still, Joshi's assessment of Apple's business can still be useful for equity investors.
Instinet analyst Jeffrey Kvaal believes that smartphone sales in China have "proven more resilient than other retail sectors," especially considering the public health situation. Kvaal argues that the worst is likely in the rearview mirror, at least in China.
The COVID-19 crisis is undoubtedly terrifying, but the recent volatility is an opportunity for long-term investors to buy shares on the cheap.