- Apple is set to report earnings after the close on Thursday.
- Earnings season has been mixed but probably better than worst fears.
- Apple can set the tone for future direction due to its size and influence.
Apple (AAPL) is set to report earnings after the close on Thursday in what will be the most keenly anticipated call of earnings season. So far the predictions have been largely ahead of the doom and gloom merchants with the Fed helping equities higher on Wednesday. While earnings are declining and some such as Walmart (WMT) have once again sparked thoughts of doom and recession, the big tech names have so far held up reasonably well. Google (GOOGL) managed to beat despite an advertising downturn, and Meta Platforms (META) stock also reacted well to earnings despite another evident slowdown. This can be largely attributed to macro conditions as the Fed engineered a relief rally. If Amazon and Apple earnings are not terrible, then we expect this current rally to extend.
Apple earnings preview
Concerns have been mounting over a slowdown in China affecting manufacturing output for Apple and demand. Add this to an expected global slowdown over inflation and recession fears, and this quarter looks more important than ever. Before the Fed-juiced rally last night, we would have said the risk-reward going into earnings was for a better than expected result and a strong rally. Now with the Nasdaq surging over 4% and Apple meeting much of that gain, the opportunity is less clear-cut. We will have to adopt a wait-and-see approach.
Earnings per share (EPS) is expected to come in at $1.15, and revenue is estimated at $83 billion. We remain nervous about the strong reliance on China for both manufacturing and especially demand. Lockdowns have not helped. There will be a noticeable slowdown in orders at some point, but the question is: this quarter or next? We have seen a suite of negative economic data from China this month, but with China embarking on a loose monetary policy this may offset that slowdown. We all know what happened to demand when the Fed embarked on its loose monetary policy, so China may engineer its bubble and pump up demand. That would be beneficial for Apple in the short term.
Separately, it will be interesting to hear of any plans for the rumored Apple car. Apple has recently signed a top executive from Lamborghini, according to a report in Bloomberg. The Apple car was or is due in 2025.
Apple stock forecast
In our deep dive, we have a $100 price target for Apple for the next 12 months. We based this on shrinking margins and demand. This will happen either this quarter or next, so stay tuned.
The recent rally has been impressive and means we go into this earnings in completely neutral mode. Resistance from the 200-day moving average at $159 is first up, and a break here opens a move to $171.40. Note the recent move to overbought status by the Money Flow Index (MFI). Though not confirmed by the Relative Strength Index (RSI), it is still close to overbought in the short term.
AAPL stock chart, daily