Apple ‘no contest’ vs. FBI boosts shares more than new iPhone
Ken Odeluga April 1, 2016 12:57 AM
<p> It won’t have escaped the notice of any Apple investor that the stock has recently come off the ropes. iPhone holding pattern This […]</p>
It won’t have escaped the notice of any Apple investor that the stock has recently come off the ropes.
iPhone holding pattern
This started to happen well before Apple’s plan to plant a flag on lower price points came to fruition last week.
In fact, the widely-held assessment that Cupertino California’s most famous resident remains in something of a ‘holding pattern’ ahead of the release of a new flagship iPhone in September, still makes a great deal of sense after its announcement of cheaper watches, phones and iPads.
Whilst a more affordable iPhone SE ($250 cheaper than an iPhone 6s) is expected to tempt sections of the market that typically veers to mid-priced, largely Android handsets, the unusually compact 4-inch iPhone is barely expected to lift Apple smartphone revenues.
Smaller and lower
With iOS market share reportedly running steady at 34% vs. 52% for Android in 2015, and iPhone SE unit sales—including the newest—forecast to rise by 12 million in 2017, the latest model would add $4.8bn to total revenues, or just 2.05% of Apple’s 2015 sales, whilst lifting market share fractionally.
In the meantime, Apple is still forecast to report a first-ever year-on-year decline in quarterly handset sales when it releases Q2 results on 25th April, having said iPhone sales flattened in the December quarter.
Therefore, AAPL’s rise of 20% off January lows after a horrendous 2015—it ended the year lower for the first time since 2008—suggests re-rated expectations are not being driven by hopes of an immediate rebound in iPhone sales.
Rather, Apple’s spirited stand and eventual ‘technical victory’ over the FBI (a ‘no-contest’ to use a boxing metaphor) has at the very least done Apple’s ambient public image and, perhaps shares, no harm.
Only the misguided would venture to argue that Apple’s corporate passion about the protection of customers’ privacy was long-standing, deep-rooted and/or categorical.
But as connected mobile devices embed themselves ever deeper into the personal digital lives of individuals, Apple’s tacit reassurances that it is not casual about personal data have struck a chord.
So long as Apple’s Q2 sales meet downgraded expectations (for an 11% fall Y/Y to $51.69bn) the path for the stock’s continued steady recovery is likely to remain open.
From a technical perspective, in January, we pointed out the significance and importance of Apple stock’s 200-week moving average, a threshold it had not crossed for about 7 years.
Please click image to enlarge
At the time, AAPL was trading dangerously close to the line, the symbolic import of which could have quickly translated to actual deeper losses, if it were breached.
Having risen out of danger since then, Apple shares were within reach of their equally important 200-day moving average (DMA) at the time of writing, which recently bisected 61.8% of the stock’s Nov-Jan fall by extension; a significant barrier.
Please click image to enlarge
A recent successful passage past a similarly weighty 38.2% interval, and 50 and 100-DMAs were further confirmation that AAPL’s current uptrend has good legs.
The stochastic momentum profile (sub-charts in both images above) is also supportive.
A sustained conquering of current overhead hurdles would leave the shares with almost clear blue skies until theoretical completion of the current extension at $124.
Failure would bring risk of a near-term fall back to at least a consolidation zone currently crossed by the 100-DMA (lilac line) around $107-$104.
Should even that area give way, a large gap below might well take AAPL back below $100 again.
The psychological market impact on sentiment seen when the price traded below that marker last time, would probably recur.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.