Apple stock is down by more than 4% year to date, but it’s trying to flatten out as investors consider whether tomorrow’s earnings report will be a disappointment or a pleasant surprise. Shares dipped below $100 earlier this month and stayed there for a while, but they’re back up above the century mark even though they’re down by 0.73% at $100.68 as of this writing.
So will Apple stock stay above $100 a share? A lot hangs on that first fiscal quarter report. Currently it seems as if $100 is serving as a support level, but the bough might break—or shares will rally nicely tomorrow night.
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Upside or downside in Apple stock?
In after-hours trading tomorrow and during regular trading hours on Wednesday, the stock will probably move by a significant percentage based on the report. Buying shares today and tomorrow ahead of closing bell is a bet for or against iPhone unit shipment numbers as investors are anxiously watching to see just how bad the iPhone 6s lineup did during the holiday shopping season.
December’s unit number should provide a hint about what to expect for the March quarter. Analysts generally expect iPhone shipments to come in at between 74 million and 76 million for the December quarter. Analysts are predicting earnings of $3.25 per share and $77.1 billion in revenue for the quarter. The company guided for revenue of $75.5 billion to $77.5 billion.
Perhaps even more important is Apple’s guidance for the second quarter in its fiscal 2016. Wall Street generally expects the first decline ever in the quarter as the company has cut iPhone orders twice, according to reports from its supply chain. Some analysts are also forecasting an iPhone shipment decline for the December quarter even though management said in October that they expected a year over year increase in iPhone units despite the difficult comparison.
Apple’s results to have a huge impact on markets
Forbes contributor Peter Cohan, who invests in the S&P 500 Index (in which Apple has a heavy weighting), expects the iPhone maker to disappoint although of course he would prefer a positive surprise. Because of its heft as the company with the biggest market capitalization in the world, any significant stock price movement will greatly impact the S&P 500. Unfortunately, it also depends heavily on iPhone sales as they made up 66% of total sales in China last year. Cohan also notes that Apple’s report on sales in China could give a glimpse into how the country’s massive economy is doing right now.
Although he sees a miss as being possible, he also believes that the iPhone maker might be able to surprise to the positive because analysts have set the bar so low.
Apple shifting to value stock
In a post on Venture Beat, Chris O’Brien said investors shouldn’t be too worried about tomorrow’s earnings report, noting that no matter what it says, the iPhone maker is enormously profitable. He noted that some are saying that Apple is being transformed from a growth stock to a value stock and questions why this should be seen as a negative. Indeed, the law of large numbers seems to suggest that the 50% to 60% revenue growth the company has seen in past years is over, he said, citing a report from The New York Times.
Growth is now slowing, and the massive exodus we’ve seen could be from growth investors unloading Apple shares as value investors consider whether to pick them up. He added that this would certainly result in a share price decline for some time. However, he said this switch has been happening for years now. He said the huge dividend and share repurchase programs are already attracting value investors, including Carl Icahn.
Further, he noted that some are concerned about the iPhone maker being lumped in with legacy tech firms like Oracle and Cisco Systems.