Apple Stock Climbs But Where To Now?

And, “Cut-To-The-Chase” Members Make 285% Potential Profit!

by Ian Harvey
August 14, 2019

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Apple stock has climbed over the past month from $205.86 to $223.59 last week, due to overall market optimism, easing of the tariff situation and expected release of new products. But, not all are convinced that this momentum will continue – so, where to from here? What will Stock Options Made Easy members be trading now?

 “Cut-To-The-Chase” Members made 285% potential profit with an Option Call.

A NICE POTENTIAL PROFIT FOR THE WEEK!

Shares of tech heavyweight Apple Inc. (NASDAQ: AAPL), a company that designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications, have been volatile, to say the least, since the start of 2018. Apple stock was trading at $169.20 in January 2018, and it rose to $233.00 in October 2018. Apple shares then fell to $142.00 in January this year before making a strong comeback over the last few months.

AAPL stock, at the time of this trade, Thursday, August 15, 2019, was currently trading at $205.86 per share. It had returned 28.5% year-to-date, -2.0% over the last 12 months, and 94.0% over the last three years. A lot of this volatility was due to the ongoing trade war between China and the United States. Apple shares had also been affected by slowing demand for iPhones. The company’s flagship product has seen a decline in shipments over the last two quarters.

Why the Initial Call Trade on Apple?

Just before the recommendation, President Trump announced another round of tariffs to take effect from September 1. Trump’s tweet stated that the US government would impose a 10.0% tariff on Chinese goods. This new round of tariffs will impact consumer goods such as electronics (including smartphones), footwear, and apparel.

But, and about face occurred, with Apple shares jumping as much as 5 per cent on Tuesday after President Trump's shock move to delay China tariffs.

The news that Mr Trump had relaxed his hardline stance came as some relief for investors. Apple and other US tech firms make their products in Chinese factories meaning they would have been subject to the additional tariffs.

And in the past couple of weeks the overall market has made a comeback pushing Apple shares higher, and as such, reaching a high of $223.59; providing a nice jump for the recommended option call from an entry of $3.00 to $11.54 last Thursday – returning a potential profit of 285%.

YOU NEED TO BE IN TO PROFIT!

What now for Apple?

Last Friday saw Goldman Sachs significantly slash its price target for Apple, predicting 26% downside for the shares because of a “material negative impact” on earnings for the accounting method the iPhone maker will use for an Apple TV+ trial.

“We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” wrote Goldman analyst Rod Hall, in a note.

The firm cut its 12-month price target on the company to $165 from $187.

“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1′20 to December,” Hall added.

Goldman is not accusing Apple of improper accounting but believes that hardware profit margins will suffer as a result of this TV+ free trial and investors will react negatively.

Obviously Apple disputed the negative call by Goldman Sachs on Friday, which hit the stock, taking issue with the firm’s negative characterization on how Apple would account for its new TV+ service.

Apple shares – which fell as much as 2.6% on Friday – finished trading down 1.9% at $218.75 a share.

Where to Now?

Apple unveiled its new line-up of products along with some game-changing subscription services last Tuesday. AAPL investors had mixed feeling about the aggressively priced subscription services and lackluster product discloser, with the share price up effectively flat since the product event. This is a result of a lack of enthusiasm due to several factors…..

  • The iPhone 11 is a new generation for Apple, but the changes were so marginal that analysts expect to continue to see sales declines in this segment.
  • Apple is offering one year of free service of Apple TV+ to people who buy a new iPhone, iPad, Mac or other hardware. It has priced the subscription video-on-demand service at $4.99 a month. Apple TV+ will premiere on Nov. 1.
  • It seems that Apple plans to account for its 1-year trial for TV+ as a roughly $60 discount to a combined hardware and services bundle; but this method of accounting will likely result in lower upfront ASPs (average selling prices) and margins and then higher services revenue growth; which will have a 14% negative impact on earnings per share in fiscal 2020, which starts Sept. 29.

And, caution from analysts is highlighted…..

Goldman is merely the latest example of growing caution as it cut its price target to one of the lowest on the Street.

The consensus rating for Apple -- a proxy for its ratio of buy, hold and sell ratings -- stands at 3.76 out of 5. That matches the lowest since the first half of 2004. The average target is about $219, matching the current share price.

In addition to Goldman, recent cautious calls have included New Street Research cutting its own price target earlier this week and warning of a “multi-year decline” in iPhone demand.

On Friday, Rosenblatt said it was seeing “weak” pre-orders for the latest version of the iPhone. The research firm has a Street-low price target of $150 on Apple stock, and it downgraded the shares in July. That brought the number of sell ratings to five, the highest number since at least 1997.

There are some positive aspects, but maybe these are being outshone by the negatives.

  • 5G is expected to propel the smartphone industry back into growth, and Apple is putting a big bet on this new technology.
  • Apple is attempting to diversify its revenue drivers with a significant push from its accessories like the AirPods and Apple Watch.

What Can You Do?

Based on analysts’ cautious approach to Apple, the negative impact on earnings and luke-warm sentiment to the new product line-up, there is an expectancy that Apple shares should decline.

Therefore, if you agree with this scenario you may wish to join us at Stock Options Made Easy in the “Cut-to-the-Chase” members area to find out what options trade we are recommending.

If you are not a member and are interested in being part of this profitable action just CLICK HERE.

AS ALWAYS THE DECISION IS YOURS!

OR other memberships.....CLICK HERE......


An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.

It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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