Apple momentum to continue despite chip shortage, Evercore says

Evercore ISI has reiterated its positive stance on Apple (AAPL), stating that the company's momentum is likely to continue even in the face of a potential memory chip shortage. The investment firm believes that Apple's strong product cycle and robust demand for its devices will help it overcome any supply chain disruptions. This confidence is rooted in Apple's scale and long-term supplier contracts, which provide a buffer against tight memory markets. The firm's analysts highlight that Apple's earnings yield, currently around 3.5%, remains attractive relative to the 10-year Treasury yield near 4.2%, a spread that historically supports valuations under the Fed model. With a forward P/E of 28x, Apple trades above its 5-year average of 24x, but Evercore sees room for multiple expansion given the product cycle strength.

For stock market investors, Apple's resilience is a key indicator of the broader tech sector's health. As one of the largest components of major indices like the S&P 500, Apple's performance often influences market sentiment. The company's ability to navigate chip shortages could signal strength in the supply chain management of other tech giants, potentially supporting equity valuations. Breadth indicators show that the tech sector has been leading market gains, with sector rotation favoring large-cap growth names amid a backdrop of declining volatility (VIX near 14). Apple's buyback yield of approximately 3.7% also provides a floor for the stock, as the company continues to repurchase shares aggressively. Traders can monitor Apple's real-time stock price on NowPrice to gauge immediate market reactions, while options-implied volatility suggests a 2% expected move around earnings.

Looking ahead, investors will watch for any updates from Apple's suppliers and the company's own guidance on future quarters. The memory chip market remains tight, but Apple's scale and long-term contracts may provide a buffer. Any signs of easing supply constraints could further boost the stock, while persistent shortages might test the company's margins. The next earnings report will be crucial for assessing the impact on Apple's bottom line, with consensus estimates calling for EPS of $1.59. Key levels to watch include support at $170 and resistance at $200, with the stock currently trading near $185. A break above resistance could signal further upside, while a drop below support might indicate a shift in sentiment.