When:

Tuesday 28th January after US close

 

Expectations:

Revenue $85.5 billion - $89.5 billion exp.

EPS $4.53 exp.

 

A lot to live up to

After rallying over 100% across the previous year, 33% in the past three months alone and joining the exclusive $1 trillion dollar club, the pressure is on Apple to prove that it is worth recent lofty valuations. After returning to top and bottom line growth the market will want to see that the momentum can continue.

 

Favourable earnings expected

Revenue guidance is between $85.5 billion and $89.5 billion with the midpoint implying 4% growth. Apple’s guidance is typically conservative. Services and wearables are expected to see another period of strong growth whilst iPhone sales saw an upswing in demand in the final part of Q4 boding well for Q1.

 

Key points to watch for on earnings call:

  1. 5G – management comments on plan to capitalise on 5G network

  2. Emerging services – comments on financial services, how Apple card is performing, and healthcare could be increasingly important drivers in 2020.

  3. Non – smart phone products – after strong Christmas sales of Apple watches and Air Pods Pro

 

Risks Ahead - Upgrade cycle 2020

Recent optimism surrounding Apple is owing to the upgrade cycle that the broader smart phone market is heading into. For the past few years customers have had little reason to upgrade or replace their phones, hanging onto their devices for longer.

With the build out of the 5G network, customers will have a reason to upgrade their phones. 5G and China are expected to be big drivers of growth at Apple. US, UK and Korea will also play their part.

It is this upgrade cycle, the wearables business and Apple’s focus on services, which are the main reasons behind analysts lifting Apple’s price target, helping to lift the share price.

There is of course no guarantee that the 5G upgrade cycle will appear. There is always the possibility that investors won’t be wowed by Apple’s 5G iPhone or simply aren’t interested in upgrading to 5G. iPhone shipments actually declined during the move from 3G to 5G.

As demand expectations have helped lift Apple shares to $319.99, should that demand fail to materialise across the coming year, Apple’s share price take a hit.

 

Chart thoughts

Apple trades firmly above its 50, 100 and 200 sma on a strongly bullish 4 hour chart. On the RSI, it has dipped back below 70 so is no longer in over bought territory. Immediate resistance is at $319.99 the recent all-time high. Immediate support is at the psychological level of $300.

BATS

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