Can APPLE Generate More Upside?

The world's largest company is expected to have good results over the last quarter, but concerns over China and global growth linger.

Stock Up More than 30% YTD, More to Go?

Apple shares have appreciated over 30% this year, being one of the leading contributors to the market's growth. Having priced in such gains might make it difficult for earnings to generate more upside. However, the company's move to raise the price point of products in some regions is seen as supporting overall revenue.

The services revenue segment remains troublesome, which has taken up some of the slack from product sales impacted by weaker consumer sentiment. Amazon's AWS saw trouble ahead for its cloud services, which might foreshadow trouble for Apple as customers look to optimise expenses. But the company's strong balance sheet has proven attractive to investors worried about the future.

Earnings Consensus Similar to Prior Year

Apple's outlook, typically provided in the conference call following the earnings report, will likely be the focus, particularly regarding expectations for China. While the Asian giant represents around a fifth of the company's sales, it accounted for a third of its growth last year. Chinese consumers have been slow to pick up new iPhones even as the country continues its recovery following the lockdowns.

Since the pandemic, Apple has not provided formal guidance since the start of the pandemic. It provides "directional insights", which lead to more room for interpretation. During last quarters conference call, the company suggested that this quarter would have similar results to the prior year when sales were down 5%. The consensus is that earnings will be lower at $1.43, along with sales at $92.9B.

APPL Can't Get Out of Flag

The share price of APPLE struggles to get through the upper flag trendline connecting the peaks at $183 and $176. The most recent attempt has so far received rejection at $170 and has retested the trendline as support, making the short-term price action all more important. If bulls can reclaim the local top and surpass the peak of $176, an attempt at January 2022 high might be seen. Losing $163 or the round support of $160 might open the door to $143.

Source: SpreadX APPLE

Key Takeaways

Apple expects good results for the last quarter, but concerns over China and global growth remain. Despite Apple's shares having appreciated over 30% this year, it may be difficult for earnings to generate more upside after being priced in. However, Apple's move to raise prices in some regions is seen as supporting overall revenue while the services segment remains troublesome. Additionally, Chinese consumers have been slow to pick up new iPhones, and Apple has not provided formal guidance since the pandemic's start. The consensus is that earnings will be lower at $1.43, along with sales at $92.9B.