eyeQ: time to buy this Magnificent Seven stock?
interactive investor has teamed up with the experts at eyeQ who use artificial intelligence and their own smart machine to analyse macro conditions and generate actionable trading signals. Here’s what it says on this US tech stock.
31st May 2024 10:30
by Huw Roberts from eyeQ
"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
Apple
Trading signal: long-term strategic model
Model value: $180.10
Fair Value Gap: +5.85% premium to model value
Model relevance: 78%
Data correct as at 31 May 2024. Please click glossary for explanation of terms.
An Apple a day…
Apple Inc (NASDAQ:AAPL) has had some bad press of late, but it remains a spectacular company. It is a mainstay in most peoples’ portfolios for very good reason.
From a macro perspective, however, it looks fairly fully priced right now. The stock has rallied 16% from the mid-April lows. Over that same time, macro conditions have also improved but not to the same degree - eyeQ’s model value is up 8.1%.
That leaves the stock almost 6% rich relative to big picture stuff such as US inflation, the dollar and what the Federal Reserve are doing on interest rates. That’s the rich end of historical ranges on our models.
It is also worth noting that on eyeQ it is, by some margin, the richest of the so-called Magnificent Seven technology stocks. It has discounted a lot of good news relative to macro conditions, and relative to its peers.
Macro relevance is high, so the machine is cautious here. But context is essential. Investors in for the long haul can safely ignore this.
This is a message for those active, tactical players who occasionally look to top slice some of their holdings. Or alternatively for those looking to put cash to work in the market, it’s a warning to maybe look elsewhere, or simply wait for now. The point is the risk/reward at this point.
Finally, an important non-macro-observation. Apple’s famous Worldwide Developers Conference is coming up.
If the WWDC between 10-14 June announces the launch of new artificial intelligence (AI) features in its operating system, this post becomes immediately redundant. Apple joining the AI revolution would be a game-changing event that far outweighs the macro picture.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
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