Apple delivered a rare EPS miss and revenue drop, but the markets shrugged off the disappointing quarterly results. Here is where the stock could be headed next.
- Recommendation: Buy
- Entry Price: $150
- Stop loss: $146
- Price Target: $175
- Risk-reward: 6.2
Apple Stock: A Holiday Season To Forget
On Thursday, Apple (AAPL) – Get Free Reportreported disappointing quarterly results which not only missed analysts’ expectations, but also corresponded to the company’s first sales decline since 2019.
AAPL’s revenue for the quarter came in 5.5% lower than last year due to difficult economic and financial conditions. iPhone and Mac revenue declined 8.2% and 28.7% year-over-year respectively, as consumers pulled back on their holiday spending. CEO Tim Cook added that a strong dollar, production issues in China and a ‘challenging macroeconomic environment’ were to blame for the tech giant’s poor quarterly results.
AAPL did not provide revenue guidance for the current quarter ending in March, but did offer some data points on performance expectations. CFO Luca Maestri commented that services were expected to grow while iPhone sales will experience a smaller decline compared to the December quarter.
How Did AAPL Shares React Post-Earnings?
Despite initially selling off more than 4% in afterhours trading, AAPL staged a huge comeback rally on Friday, closing 2.4% higher. This comeback rally indicates that the market is looking past AAPL’s disappointing quarterly performance and instead focusing on the outlook of the company.
With China’s Covid crisis in the rear-view mirror and the Fed easing the pace of monetary tightening, macroeconomic tailwinds seem to be easing, which could trigger a rally back to previous highs at $175.
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After falling 27% in 2022, AAPL has rallied 19% year-to-date, paring back some of its losses. AAPL shares have been on an uptrend since January, outperforming both the SPY and QQQ.
Friday’s bullish price action and engulfing candlestick pattern is a positive sign that AAPL can continue to extend its gains. However, shares are currently overbought and could experience a minor pullback before the rally resumes.
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AAPL: $150 Remains A Key Level To Observe
AAPL’s hourly chart shows the stock is already pulling back following its tremendous post-earning rally. Momentum indicators are hinging downwards, highlighting that bullish momentum is starting to fade out and sellers are stepping in.
Given the selling pressure, $150 is a strong level of support which AAPL could pull back to. Holding the $150 level of support would provide further confidence for bulls, paving the way for a rally back to highs at $175.
Therefore, rather than jumping into a long position now, traders should observe AAPL’s price action at $150 and only enter a position once the price has fully consolidated. A stop-loss can be set at $146 alongside a price target of $175, giving a risk-reward of 6.2 for the trade.
Ask Twitter
Last Friday, we asked the Twitter-verse: “What did you think of Apple’s fiscal Q1 earnings report?“. Here are the responses.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)
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