While SpaceX (NASDAQ: SPCX) stock is tanking at the moment, Apple (NASDAQ: AAPL) shares are surging. Recently, it’s hit new all-time highs above $330.
So what’s with this divergence in the two mega-cap US stocks? And could Apple shares be worth a closer look?
Why are SpaceX shares tanking?
Since 16 June, SpaceX shares have fallen from around $225 to $127. That represents a fall of over 40%.
Personally, I’m not really surprised by this collapse. Because in mid-June, the valuation looked a bit silly.
At the time, the market cap was near $3trn. At that valuation, the company looked significantly overvalued.
Last year, revenue here was only $18.7bn. So, the price-to-sales ratio was off the charts.
It seems investors are finally catching on. According to CNBC, they’re aggressively shorting the stock (betting against it) at present.
Now, I don’t plan to short it myself. But I do expect it to fall further, given that insiders and long-term investors will shortly be about to offload stock.
I’m targeting a share price of around $100. If it was to fall to near that level, I may consider buying a few shares to tuck away for the long term.
The factors driving Apple’s share price
Turning to Apple, it’s a very different set-up. While SpaceX has crashed from $225 to $127 since 16 June, its share price has jumped from $299 to $335 (+12%), turning £5,000 into around £5,500 when factoring in FX rates.
While everyone was focusing on the shiny new thing on the Nasdaq, this old-school tech stock was quietly moving higher. Note that year to date, it’s up more than 20%.
Why is the stock ripping? There are a few reasons.
One is that investors are realising that Apple is most likely going to be the key gateway to AI for consumers. With 1.5bn iPhone users globally, the company is in an incredible position when it comes to offering consumers mobile access to AI models such as ChatGPT, Gemini, and Grok.
Another is that the company is spending far less on AI than the other mega-cap tech firms are. While the likes of Amazon, Alphabet, and Meta are throwing hundreds of billions of dollars at the buildout, Apple is spending almost nothing!
We could also be looking at a massive upgrade cycle, both for iPhones and computers. According to Morgan Stanley, roughly 1.3bn active iPhones can’t support the new AI-powered Siri.
It’s worth pointing out here that a lot of consumers bought Apple technology during Covid when disposable income was high. Today, much of this technology is probably on its last legs.
Upgraded to Buy
Are the shares worth considering today? Analysts at HSBC believe so.
They just upgraded the stock to a Buy rating and lifted their price target to $366. They reckon Apple’s robust product pipeline and enhanced AI capabilities are likely to drive growth in hardware revenue.
Personally, I’d be a little bit cautious after its recent run because the valuation is now quite lofty. With the price-to-earnings (P/E) ratio at 34 using the earnings forecast for the financial year starting October, there’s not much room for a setback such as a slowdown in sales.
That said, the share price trend is up and brokers are raising their price targets. So a small starter position could be worth considering.
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Edward Sheldon owns shares in Apple, Amazon, Alphabet, and Nasdaq
