Apple: Could It Break the Ascending Wedge Structure After Earnings Report?

Written by Larince Zhang

Apple,Inc., an American multinational technology company specializing in the design, manufacture, and sale of smartphones (iPhone), personal computers (Mac), tablets (iPad), wearables and accessories (Apple Watch, AirPods, Apple Beats), TVs (Apple TV) and other varieties of related services (iCloud, digital content stores, streaming, licensing services), shall release its Q2 2023 earnings results on 4th May (Thursday), after market close. What lies ahead for this conglomerate with the largest market capitalization at over $2.6T?

Fig.1: Apple Inc. Revenue by Product Category. Source: MacRumors

In the previous quarter, Apple sales revenue recorded its largest decline since 2016, by over -5% compared to the same period last year. This was also the year-over-year sales decline since 2019. By product category, Mac revenue down the most, -28.66% (y/y) to $7.74B; iPhone revenue down -8.17% (y/y) to $65.78B, mainly impacted by the production issues in China (less likely to happen again as Apple is slowly reducing its manufacturing activity in China); Other Products revenue down -8.3% (y/y) to $13.48BiPad was the only product category that recorded positive gains, up +29.66% (y/y) to $9.4BServices revenue was up +6.4% (y/y) to $20.77B. The less-favoured sales result was related to challenging macroeconomic environment and the still-strong Dollar. Net profit was down -13.3% (y/y) to $30B.

On a positive note, Apple Inc marked 2 billion active users on all of its products, up from 1.8 billion as reported in January last year. Consistent improvement in global reach may suggest better monetization from old and new customers through its products and services in the future.

In addition, the company may continue to see more positive breakthrough from its services category, after achieving an all-time revenue record despite the difficult environment. Recently, the company has introduced a payment feature namely Apple Pay Later , which allows its users in the US to split purchases into four payments, with zero interest and no extra fees incurred. Other highlights include multiple payments to different merchants in a single transaction, easy order tracking and secure merchant tokens.

On 17th April, the company announced that it shall work in collaboration with Goldman Sachs in offering Apple Card users a saving account with a 4.15% APY. The rate is said to be higher than the national average by 10 times! Users will be able to easily set up the account, build savings directly and seamlessly, track account balance and interest earned anytime, and even get unlimited daily cash back up to 3%.

Fig.2: Reported Sales of Apple.Inc versus Analyst Forecast. Source: CNN Business

Consensus estimate for sales stood at $92.9B, significantly down -20.73% from the previous quarter, and down -4.52% from the same period last year.

Fig.3: Reported EPS of Apple.Inc versus Analyst Forecast. Source: CNN Business

On the other hand, EPS is expected to reach $1.43, down -23.94% from the previous quarter, and down -5.92% from the same period last year.

The management expressed a pessimistic outlook for the coming quarter, including Mac and iPad sales declining by double digits compared to the same period last year; iPhone sales may also fall but at a less deteriorating rate.

Technical Analysis:

#Apple ($AAPL)  share price pared most of its losses incurred in the latter half of 2022 since gaining ground in early January this year, printing year-low at $124.17 (a level not seen since June 2021). The asset rebound strongly in Q1 2023 and now traded within an ascending wedge pattern. $170 ( FR 78.6%, extended from the high of Jan’22 to the low of Jan’23) and the upper line of the ascending wedge serve as the nearest resistance. A successful break above these levels may lead the bulls to continue testing the high of Q3 last year ($176.14) – $177, followed by the high of Jan ‘22, at $182.87. On the other hand, the bottom line of ascending wedge serves as the nearest support. A break below this line may indicate a halt to the upside momentum, and the share price may test $160.50 (FR 61.8%), followed by $153.50 (FR 50.0%) and the dynamic support 100-day SMA.

About the author

Larince Zhang

Larince entered the world of live market analysis and trading in 2013. Her passion ranges from foreign exchange to commodities, indices and futures as well as stocks. Having a Bachelor Degree majoring in Banking and Finance, she strives to make full use of her learned knowledge together with practical trading to achieve a more comprehensive market analysis.

Through years of trading experience, she believes “Simple is Best”, as the market is driven by human activity. It is human psychology that one should opt to improve on instead of mere technical or fundamental analysis. She believes in three core elements to a mature trading approach – scrupulous trading mindset, well-planned strategies and strict money management.