Apple: Entanglement in 100-Day SMA Before Earnings Release

Written by Larince Zhang

Apple Inc,an American multinational technology company that specializes 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 Q1 2023 earnings result on 2nd February (Thursday), after market close. What lies ahead for this conglomerate with the largest market capitalization at over $2.3T?Fig 1:Shares of Apples Revenue by Product Category – Source: Statista

Apple’s iPhone sales have accounted for most of the company’s total revenue for over the last few years  In Q4 2022, the company reported $90.15B in revenue, up 8.1% on the year-ago period. iPhone revenue was $42.63B, up +9.67% (y/y); Services revenue was $19.19B, up +4.98% (y/y); Mac revenue was $11.51B, up +25.39% (y/y) while the iPad revenue was $7.17B, down -13.06%. Other products revenue was $9.65B, up +9.85% (y/y). For fiscal 2022, Apple’s final sales revenue was up 8% to $394.3B (CEO Tim Cook: “…would have grown to “double digits” if not for the FX headwinds”). Net profit was $20.7B (versus $20.5B (y/y)), or EPS $1.29 (versus $1.27 (y/y)).

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

Consensus estimates for sales of Apple Inc in Q1 2023 stood at $121.8B, up over 35% from the previous quarter, but slightly down -1.72% from the same period last year. In the previous quarter, Apple’s MacBook (specifically the M2 Pro and M2 Max) delivered impressive sales results, thanks to the company’s new wholly owned high end processors technology that allowed its products to work way faster, which helped the company not only secure a competitive edge in the market, but at the same avoid third-party bottlenecks.

Fig 3:Revenue Change for Desktop PCs, Laptops and Tablets (Worldwide). Source: Statista

The management expects Mac sales to decline substantially in the coming quarter following a globally slowing PC market, yet remains confident that this downturn could be quickly reversed. The data above has revealed a more than 4% decline in the revenue of desktop PCs, laptops and tablets last year. This year, it is projected that revenue of both desktop PCs and laptops could improve substantially by +1.7% and +1.6% respectively.

Fig 4:China Smartphone Sales Market Share. Source: Counterpoint

On the other hand, the latest statistic revealed that Apple’s iPhone ranked 2nd in the global market share, at 26.98% (just behind Samsung’s 27.38%). This shows a high penetration rate of iPhones in the market, but it should not be underestimated that Samsung could continue to lead the race in near term as it expands aggressively into new markets specially India and China. Last year, the iPhone became the #2 favourite smartphone brand in China for the first time ever in history (thanks to its latest iPhone 14 model), despite the country’s weakened consumer demand and cooling domestic economy. However, following China’s relaxed Covid policy and the subsequent operation of local production plant Foxconn recently, market participants expect that supply chain disruption could be further relieved, meanwhile there will be marginal recovery in the smartphone sales.

Fig 5:Reported EPS of Apple Inc versus Analyst Forecast. Source: CNN Business

EPS is expected to hit $1.94, up over 50% from the previous quarter, and slightly down -8.25% from the same period last year. In general, the forecast figure reflected analysts’ optimism.

Technical Analysis:

#Apple  (AAPL.s) share price last closed below resistance zone $145-$147, retesting dynamic support 100-day SMA. If selling pressure persists, a break below the moving average could further bring the company’s share price down to the next support at $139. There is minor support at $134-$135, a low level seen in Oct/Nov last year, followed by June ’22 low at $129. On the other hand, if price breaks above the strong resistance $145-$147, there is possibility for the bulls to continue testing $153, an FR 50% extended from the lows in June ’22 to the highs in August ’22. A solid breakout above the level could mark a price escape from the bearish territory in the near term.

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.