** OPTION TRADE: Buy the AAPL SEPT 15 2017 155.000 CALL at approximately $2.80. Place a pre-determined sell at $5.60.
Note: No protective stop losses added -- but if you wish to do so make it $1.10.
Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!
You may also wish to read Stock Options Made Easy Trading System
by Ian Harvey
Please Note: Apple trade was mentioned in “Earnings Predictions for the Week Beginning July 31, 2017”
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, will report earnings results tomorrow, August 01 after the close.
The consensus earnings estimate is $1.57 per share on revenue of $44.67 billion but the whisper number is higher at $1.61 per share.
When the company last reported on May 2, earnings of $2.10 per share beat estimates by eight cents on a 4.6% rise in revenue.
Apple is likely to beat earnings when it reports. While many are considered about China declining, it is actually China’s slowing decline that will help the company produce an earnings beat.
Apple Inc. has a 52 week low of $102.53 and a 52 week high of $156.65. The company has a market capitalization of $779.47 billion, a P/E ratio of 17.54 and a beta of 1.31. The firm has a 50-day moving average of $146.92 and a 200-day moving average of $141.83.
Influencing Factors
Apple's financial results are largely driven by its iPhone business unit, and last quarter, Apple was still selling its old iPhone 7 series smartphones.
Things should get interesting later in the calendar year, when Apple begins rolling out its new iPhone models, which many believe will be compelling enough to trigger a so-called "super cycle" that'll lead to a big surge in unit demand.
Three product segments posted double-digit growth: services, Mac, and other products will likely be the driving force behind the next earnings report. These three segments achieved second-quarter revenue growth of 18%, 14%, and 31%, respectively. And two of these segments -- services and Mac -- look poised to deliver more growth in Q3 (Apple's "other products" segment, which accounted for about 5% of Apple's second-quarter revenue, is difficult to predict).
Apple's services segment should continue to benefit from the company's fast-growing App Store revenue. In a recent update on its App Store, Apple revealed that both App Store downloads and revenue is soaring. With trailing-12-month App Store downloads up 70% year over year as of June 1, app revenue doesn't look like a catalyst ready to slow down yet.
And the Mac business is looking hot as well. Not only was Apple still benefiting from its October 2016-released redesigned MacBook Pro in its most recent quarter, but the company launched an array of new Mac products with about three weeks left in Q3. Apple made its updated iMac, MacBook, MacBook Pro, and MacBook Air available online and in stores in early June.
Together, Apple's services and Mac segments accounted for a notable 24% of Apple's revenue in Q2. If these segments can grow in at the robust rates in Q3 that they did in Q2, Apple should be able to easily achieve its guidance for overall revenue growth of about 5%. Add in the possibility of Apple's recent iPad lineup refresh serving as a growth driver during the quarter, and there's definitely good reason for investors to expect Apple's return to growth to persist.
Analysts and Hedge Funds Opinions
In a note to investors earlier this week, Stifel analyst Aaron Rakers said that his intra-quarter data analysis pointed to only 38 million to 40 million iPhones shipped during the June quarter.
Rakers pointed to stabilization of
demand in China, noting that Apple is up against a much easier comparison this
time around. The iPhone maker has been struggling there despite many efforts to
woo Chinese consumers. In the March quarter, Apple’s Greater China revenue
tumbled 14% year over year, and in the December quarter, sales in the region was
down 12%.
Most analysts agree that Apple needs to
convince more Chinese to buy its phones, although it has been suggested that
the iPhone 8 will be so magnificent that they will indeed buy it. Rakers
reported that his intra-quarter data analysis suggested continued weakness in
China during the June quarter as Chinese consumers hold off purchasing a new
phone until the iPhone 8 comes out.
He estimates that the App Store
contributes 30% to 35% of Apple’s Services revenue. He also expects Apple’s
Services business to continue the strong momentum it has shown in the weak of
the 18% year over year growth recorded in the March quarter.
Apple management has said they expect
Services revenue to double over the next four years. In the long term, Credit
Suisse analyst Kulbinder Garcha sees Apple’s Services revenue reaching $52
billion “driven by a high quality, affluent, digitally transaction user base of
1.1bn devices and around 650 million users.”
Harvey’s Options Volatility Indicator
Summary
This is a relatively calmer quarter for
Apple. Apple’s revenues will continue to be driven by the fast growing
“Services” segment as well the sales of iPhone 7 and 7 Plus. Services include
revenues from App store, Apple Music and Apple Pay.
In the second half of fiscal 2017, Apple
will be launching its mega edition, iPhone 8, around September.
iPhone 8 is set to be launched to mark
the tenth anniversary of the revolutionary iPhone. It is reported to have
amazing features like a glass body, a dual-curved edge-to-edge OLED display
with a built-in Touch ID sensor and wireless charging. iPhone 8 is already
dubbed a “super cycle”.
Meanwhile, the company remains focused
on finding newer growth avenues. It is also working on developing technologies
such as artificial intelligence (AI) and augmented reality/ virtual reality
(AR/VR), which are fast emerging as lucrative business opportunities. The
company’s interest in the autonomous car project is understandable as it is now
being labeled as a big business opportunity. Apple also remains focused on
increasing its market share in India.
Apple has been one of Wall Street's hottest stocks this year. Over the past one year, the stock has registered growth of 44.3% compared with the industry’s gain of 43.7%.
Therefore, based on the facts above, and
Harvey’s Options Volatility Indicator, the following option trade is
recommended…..
** OPTION TRADE: Buy the AAPL SEPT 15 2017 155.000 CALL at approximately $2.80. Place a pre-determined sell at $5.60.
Note: No protective stop losses added -- but if you wish to do so make it $1.10.
”Success is simple. Do what's right, the right way, at the right time.”
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