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Alan Farley

Dow component Apple Inc. (AAPL) reports earnings after Thursday’s U.S. closing bell, headlining the busiest week for big tech stocks of the third quarter earnings season. Analysts are pounding the tables ahead of the release, expecting a profit of $0.70 per-share on $62.7 billion in Q3 2020 revenue. While that marks just 23% of Q3 2019 earnings-per-share (EPS), Wall Street’s undivided attention is now focused on last week’s iPhone release.

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iPhone 12 Should Drive Higher Sales

The next iPhone generation should book excellent sales and impressive margins, if the euphoric early teardowns and reviews are any guide. The release marks the start of the 5G era for Apple, even though the buildout won’t be done for three to five years. The higher price tag crushes the $1,000 barrier after resistance in the early days of the iPhone 11 while a boost in graphic performance will improve gaming capabilities, underpinning Chinese and Asian sales.

Cowen’s Krish Sankar issued upbeat commentary after the Oct. 13 release event, stating “We maintain our Outperform rating on AAPL as we believe the arrival of 5G wireless and a range of screen form factors could be a catalyst for consumers to replace older devices. The refreshed iPhone product family was largely in line with our expectations, and the modest sell-off in the stock post the event is not surprising given the recent appreciation in shares”.


Wall Street And Technical Outlook

Wall Street has grown more cautious in recent months, due to returns in excess of 50% so far in 2020. Current consensus yields a ‘Moderate Buy’ rating, based upon 25 ‘Buy’, 8 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of just $67 to a Street-high $150 while the stock closed Friday’s session $10 below the median $125 target. There should be plenty of room for upside after a strong report, given this placement.

The rapid share appreciation set off overbought technical readings during the summer, triggering an intermediate correction just two days after the Aug. 31 four-for-one stock split. Price action has been testing support at the 50-day moving average for more than 7 weeks while long-term relative strength indicators have slipped into sell cycles that could persist until year’s end. Given these headwinds, Apple could remain rangebound until the first quarter of 2021.

For a look at all of today’s economic events, check out our economic calendar.

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