Apple earnings look ahead

Apple is forecast to report a 14% rise in earnings for the quarter, to $3.84 per share. Revenue is expected to be 11.4% higher, at $87.3 billion. The average move on results day for the stock is 4.42%, while the current implied move, according to options pricing, is 5.6%.

These quarterly results will be our first look at iPhone X sales, potentially a big moment for the firm. It is worth noting that this quarter is usually the firm’s biggest, as new iPhone sales come through. Weaker than expected demand has been a major concern for the market, but given the current rally, any weakness is likely to be a buying opportunity (see below). March guidance will be crucial, as usual, and we can expect any weakness in iPhone sales to be projected forward as well.

At 14.4 times forward earnings, the stock doesn’t seem excessively expensive, although it is above the five-year average of 12.6.

Apple stock continues to clock up higher highs and higher lows, as the medium-term uptrend from the mid-2016 low continues. While it has dropped back from the recent record high at $180.00, the pullback has pushed the stochastic momentum index (middle panel) into oversold territory, for the first time since September. In the previous three examples the shares gained an average of 12.3% over the next 40 trading days. In addition, it has found support around the 100-day simple moving average (SMA) at $166.91. The current risk-reward looks compelling for buyers to either initiate new longs, or add to existing positions.