Interactive Investor

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

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eyeQ investor decision making

"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

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.

eyeQ chart on Apple

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.

These third-party research articles are provided by eyeQ (Quant Insight). interactive investor does not make any representation as to the completeness, accuracy or timeliness of the information provided, nor do we accept any liability for any losses, costs, liabilities or expenses that may arise directly or indirectly from your use of, or reliance on, the information (except where we have acted negligently, fraudulently or in wilful default in relation to the production or distribution of the information).

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser. 

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.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

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