Apple earnings preview

Having spooked the market recently, Apple stock has lagged the broader market. As iPhone sales remain weak, can the firm convince investors that there is still more growth to come?

Apple is expected to report a 7.1% rise in earnings for the fiscal first quarter (Q1), to $4.17 per share, while revenue is forecast to drop 5% to $84 billion. It has beaten on earnings in eight of the last eight reports, and seven out of the last eight for revenue. On average, results day sees a move of 4.4%, while current options pricing suggests a move of 4.46%.

A warning on revenues for Q4 prompted a rout in Apple shares recently, and while there has been a recovery since then, it has been relatively anaemic when compared with other big names, and indeed with the headline Nasdaq and S&P 500 indices. This fall from grace was compounded by Apple’s decision to stop reporting iPhone sales, raising suspicions that this metric was already falling, and that the firm was trying to reduce the amount of bad news for investors to digest when earnings roll around.

Despite its attempts to focus on software, the iPad and other products, Apple continues to be driven primarily by iPhone sales. The product generates 60% of Apple’s revenue, though with around 700 million iPhones in use around the world the firm still has an impressive user base for replacements and upgrades.

Cloud services are becoming more important as a revenue segment, but they have a long way to go before they represent a meaningful element in earnings that can help offset lower iPhone sales.

Apple currently trades at 12.7 times forward earnings. The five-year average is 13.4; at the end of 2018 the forward price-to-earnings (P/E) was around 11, so some of the valuation premium has been removed. Nonetheless, Apple is still cheaper on a forward earnings basis than at any time since the end of 2016.

Apple’s rally off the lows of December has run into resistance around $158. Gains above this level have proven hard to sustain since 28 December. Rising trendline support from the January low around $142 means that we are likely about to see a significant outbreak of volatility soon. Apple stock has broken the sequence of lower highs seen in December, and near-term targets to the upside include $167 and $172. Meanwhile, a drop below rising support first challenges $150, and then down to $142 and the January lows.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.