Earnings from tech heavy weights like Microsoft, Facebook, Apple, Ebay and Amazon are on the calendar this week, along with the FOMC.
Apple will be the first to release its fourth quarter earnings for 2018 after today’s closing bell on Wall Street. Apple shares, found ground in January at around $141-$145 area, after moving sharply lower for the past 3 months.
Rotten Apple sales and reduced supplier orders warnings were pinned on the trade war with China, rattling the stock market given Apple’s prominence in all major indices and a significant 32% spill on its share price, sending the company’s stock market value to under $700 billion from October highs.
As reported on December 3 by my colleague, the low demand (significant in China, as competitor Huawei offer cheaper choices) for new iPhone sales accounted for about 78% of total sales in 2018, while the impact from additional tariffs on China on the phone’s price, was estimated at $160 per unit.
Apple’s consensus recommendation is “neutral to buy”, corresponding to the majority of the consensus recommendation for the Online Services peer group , as 13 out of 24 analyst firms suggest remaining on hold, 10 propose the “buy” and only a single one the “strong buy” possibility. According to Zacks Investment Research, the social network giant is expected to have $4.17 in earnings per share for the fourth quarter of 2018. The reported EPS for the same quarter last year was $3.89. This represents an incline over the year of 7% and a 43% rise since the reported EPS for the fiscal quarter ending September 2018.
This year, analysts are forecasting a decrease in earnings of -0.26% over the last year. Revenue was initially expected to be released at $88,293.00 million, however the company lowered its revenue to around $84 billion in early January, as worries over Apple losing ground in China strengthened .
Following the company’s lowered revenue guidance three weeks ago, Apple shares opened $12 higher this week, as market participants are looking ahead of the fiscal Quarter ending December 2018. Markets remain cautious to see whether the global trade tensions keep having an impact on the company’s growth and forecasts.
Turning to the technical side, if the company achieves accuracy with its forecast, then a positive earnings outcome without any negative surprises could attract more bulls back into the market. This could boost price action higher and hence a small recovery to October’s drop. The long term outlook however remains negative, as the pair is trading close to the lower Bollinger Bands pattern, while a bearish cross has been formed between 50- and 200-week EMA.
In the near term, a closing today above the 5-week Resistance at 159.40, but most precisely the 164.00 which reflects the 23.6% Fibonacci retracement, could boost Apple price to the mid of 23.6-38.2% Fib. level at the round 170.00 level. Further gains could retest the 176.50 barrier which coincides with 38.2% fib. level and the 20-month SMA.
The daily momentum indicators comply with a decrease of the negative momentum, while monthly momentum is still negatively configured. RSI is consolidating close to 50 since mid of October, whilst MACD lines are just a breath below the neutral zone.
A disappointing earnings outcome could extend Apple’s price lower. The asset could be immediate supported within the day at 1-week low, at $151.70 level, while further losses below 2018’s low could lead to 132.00 (FE 100 in December’s fluctuation). After that barrier, the next level to be watched would be 120.00 (a breath above 2016’s peak).
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Andria Pichidi
Market Analyst
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