Apple Upside Appears Limited Ahead of Report

Dow component Apple Inc. (AAPL) reports fiscal Q4 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of $1.24 per-share on $84.9 billion in revenue. If met, earnings-per-share (EPS) will mark a 70% profit increase compared to the same quarter in 2020. The stock sold off more than 1% in July despite beating Q3 top and bottom line estimates, with shareholders hitting the exits after the company chose not to offer Q4 guidance.

Overcoming Supply Disruptions

Apple has avoided the wrath directed toward Facebook Inc. (FB) and other tech mega-caps, with few calls for break-ups or censorship. However, many rivals would love to see the company brought to its knees, for two reasons. First, the App store may be engaged in anti-competitive behavior, highlighted by Epic Games litigation that’s now in the appellate court. Second and more importantly, social media revenue is taking major hit as a result of iOS 14’s option to turn off ad tracking.

Of course, supply disruptions mark the greatest threat to Q3 earnings. Even so, Cowen’s Krish Sankar just dismissed those concerns, noting “We forecast AAPL to report Sep Q (F4Q) results in-line with consensus despite about $3B sales impact from component tightness for iPhone and iPad. We model Dec Q sales +36% Q/Q with 81M iPhone units on strong end demand. iPad & Mac units should remain strong barring supply shortages. Services are expected to see further paid subs and search ads growth though App Store policy changes are coming.”

Wall Street and Technical Outlook

Wall Street still loves Apple but not quite as much as it did last year. Consensus now stands at an ‘Overweight’ rating based upon 27 ‘Buy’, 5 ‘Overweight’, 9 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets range from a low of $90 to a Street-high $198 while the stock is set to open Thursday’s session about $20 below the median $170 target. This placement can support additional upside but it isn’t wise to expect a rapid advance toward $200.

Apple mounted the 2018 high in the mid-50s in October 2019 and tested new support successfully during 2020’s pandemic decline. It returned to the February peak above 80 in June 2020 and broke out, lifting to 135 in September. Price action then eased into a rising wedge, with new highs in January and September 2021 stalling at the pattern’s upper trendline. In turn, this supports a modest uptick into the 160 level before resistance kicks into gear once again.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.