What to Look For in Apple Inc. (NASDAQ:AAPL) First-Quarter Earnings

What to Look For in Apple Inc. (NASDAQ:AAPL) First-Quarter Earnings

What to Look For in Apple Inc. (NASDAQ:AAPL) First-Quarter Earnings

Apple (NASDAQ:AAPL) will report earnings on Jan. 28 after market close. Broader indices, as well as many stocks like AAPL, remain near all-time highs. Year-to-date, Apple shares are up about 5.4%.

Yet the new week is already promising to be a volatile one. So today I’ll discuss what investors could expect from the company’s earnings and whether long-term investors should buy into the share prior to the earnings.

What to Look For in Apple’s First-Quarter Earnings

With a market capitalization of over $1.3 trillion, Apple stock will get the market’s full attention when it reports on Tuesday. As always, investors are hoping that it will exceed Wall Street’s average revenue and earnings estimates, mostly thanks to the strong numbers.

Earlier, in 2019, in both Q3 and Q4 reports, the group returned to revenue growth. If there is now an unexpected bump in revenue and the quarter shows a year-over-year decline, then investors would not be pleased.

Because this quarterly report will give numbers for the critically important holiday season, the Street will look at the iPhone sales trends. Since iPhone revenue accounts for over half of Apple’s total revenue, investors pay close attention to iPhone numbers. Apple is expected to debut three 5G compatible phones later in 2020.

Next would be the numbers from Apple Services, a high-margin business compared to products. Services gross margin stands around 64%, as opposed to 31% for products.

Shareholders well realize the importance of the Services segment with its potential to boost overall profitability. Last quarter, it brought in 20% of total revenue. The business includes the App Store, Apple Pay, iTunes, AppleCare and Apple Music. Analysts will also pay attention to metrics regarding Apple’s TV streaming service and its premium headphones, the AirPods Pro, which is part of the wearables.

As China is the tech giant’s second-most important market, any update from China-based revenues as well as projections for 2020 will likely make headlines.

So Should You Buy Apple Stock Right Now?

The answer depends on many factors, including your risk/return profile and time horizon. The Cupertino tech giant has a strong story and the company has a clean balance sheet, thus it remains a long-term growth play on fundamental basis.

However, there might be stock price weakness in the near-term that potential investors should anticipate. And I’d rather wait to see the various metrics in the next earnings report before buying into the stock.

I believe that much of the potential quarterly good news has already been priced into Apple stock. As it is overbought right now, it may indeed be rather risky own outright prior to the earnings, at least without a hedge in the options markets.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 290.50.

The projected upper bound is: 319.74.

The projected lower bound is: 300.04.

The projected closing price is: 309.89.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 41.8686. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 58.61. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -53. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.

Rex Takasugi – TD Profile

APPLE INC closed down -9.360 at 308.950. Volume was 47% above average (neutral) and Bollinger Bands were 36% wider than normal.

Open     High      Low     Close     Volume___
310.060 311.770 304.880 308.950 40,485,004
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 315.57 285.22 229.16
Volatility: 26 22 29
Volume: 31,972,372 28,407,302 27,499,778

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

APPLE INC gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
APPLE INC is currently 34.8% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of AAPL.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 109 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.

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