Dow component Apple Inc. (AAPL) is swap higher by about 2% in Thursday’s pre-market session after beating fiscal fourth quarter profit and gross income estimates by healthy margins. The tech icon reported earnings per share (EPS) of $3.03, well above the consensus of $2.83, while yields of $64.04 billion beat estimates by $1.20 billion. Even so, revenues rose just 1.8% year at an end year, highlighting maturing business operations bolstered by new income streams.
iPhone revenues fell 9%, but analysts trust new versions and price points to improve sales in coming quarters. Wearable items grew at an aggressive pace, gaining 54% year floor year to $6.5 billion. Rock-solid American sales growth of 7% cancelled out contraction in China, where rummage sales fell another 2% to $11.1 billion. Look for slumping sales in this venue to continue until the Of one mind States cuts a trade deal. The company raised first quarter guidance from $86.21 billion to a pass over between $85.5 billion and $89.5 billion while expecting gross margins to stay around 38% for the favour and fiscal year.
Cowen raised its price target from $250 to $290 in a Thursday morning note, keyed up that iPhone and services booked stronger-than-expected revenues for the quarter. The analyst firm is especially optimistic about the low-cost iPhone SE2 set for issue in the first half of 2020 and also looks forward to the 5G roll-out later that year. It’s instructive to note that analysts’ desks are quieter than normal following an Apple release, potentially indicating a consensus that the stock is fully valued.
The post-news reaction hurriedly mounted Tuesday’s all-time high at $249.75 and pulled back toward $246, establishing a line in the sand for the likeable session. The stock is overbought after gaining more than 30 points in October and breaking out above the 2018 dear, raising doubts about a follow-through rally after last night’s metrics. A negative tone in Thursday’s meeting could also undermine that effort, but it’s hard to bet against the company given the outstanding quarterly performance.
AAPL Short-Term Sea-chart (2017 – 2019)
The stock broke out above seven-month resistance near $195 in May 2018 and took off in a powerful trend flutter that reached $233 in October. It sold off more than 90 points into early January and beat it higher in a recovery wave that carved an uptick into $215 in May. A higher June low attracted committed purchasers, but the subsequent rally failed to mount the prior high. A third attempt in September did the trick, setting the stage for a breakout on the top of the 2018 high in mid-October.
Price action since the October low has carved a small-scale Elliott five-wave rally simulate, suggesting an intermediate top near $250. The theory is getting tested in Thursday’s session, with a buying spike exceeding that level setting the stage for additional gains. On the flip side, selling pressure could pick up steam after a volte-face, dropping into a test of breakout support above $230, with that level offering a low-risk swallowing opportunity.
The on-balance volume (OBV) accumulation-distribution indicator warns of elevated risk because the October rally has failed to allure the buying power needed to lift into or above the September 2018 and April 2019 peaks. This bearish divergence foretokens an eventual downturn that tests new support and the rising 50-day
The Bottom Line
Apple has beaten fourth post earnings and revenue estimates, reporting slumping iPhone sales but solid results in other divisions. The stock is over-bought after a emotional rally and breakout, telling market players to follow price action near $250 because a reversal is plausible.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.