Stock of the day 26/10/2015 – Apple Inc

In arguably the biggest and most anticipated quarterly report of the season, Apple announces its Q4 2015 earnings release on Tuesday.

And the question on everybody’s lips will be, just how badly will it be affected by the Chinese slowdown?

Since its all-time high at the end of April, hitting $135.90 following some stellar second quarter figures, it hasn’t been all smooth sailing for Apple. Between that date and the end of July third quarter figures the stock maintained a $125 to $133 trading band, holding on to most of its pre- and post-Q2 market growth.


(Source: IT-Finance.com 26/10/2015)

However, Apple soon fell afoul of the near-unmatchable market expectations with its aforementioned Q3 results in July. In the run up to the release Apple had managed to recover from a start of July dip to $120 all the way to $133.29, just a hair’s breadth away from its all-time highs. Yet with the 47.5 million in iPhone sales (a 35% increase) falling short of the 48.5 million expected by analysts, Apple fell by a whopping 7.5% in the aftermath of its report.

And with this release coming around a month before the China-chaos of August things were about to get a lot worse for Apple. Given that one of the biggest positives about its unpopular Q3 results was an 87% increase in Chinese iPhone sales alongside more than doubled revenue of $13.2 billion in the region, Apple’s exposure to the country, and its reliance on China for the mega-growth its investors expect, saw the company (briefly) fall below $100 for the first time since its 2014 stock-split in the aftermath of Black Monday.

A general re-settling of the markets, and the release of the iPhone 6s and 6s Plus at the end of September (selling 13 million units in the first 3 days) has helped rejuvenate the stock, however, leading it at a current trading price, and 11 week high, of $119.07 (IT-Finance.com, 26/10/2015).

In terms of its fiscal fourth quarter results on Tuesday, Apple is expected to post earnings per share of $1.88 alongside $51.02 billion in revenue and, importantly, around 48.5 million iPhone units sold. Yet for many the most interesting aspect of Apple’s Q4 results will be the guidance it gives for its Christmas period, a period that last year saw Apple post the most profitable quarter in the history of the markets.

Apple has a consensus rating of ‘Buy’ with an average target price of $144.67.