High Expectations Ahead of Apple Report

Dow component Apple Inc. (AAPL) reports Q1 2021 earnings after Wednesday’s closing bell, with analysts looking for a profit of $1.41 per-share on $103.2 billion in revenue. If met, earnings-per-share (EPS) will mark a 72% profit decline compared to the same quarter in 2020. The stock sold off nearly 6% after beating Q4 top and bottom line estimates in October, with shareholders hitting the exits on a $2 billion shortfall in iPhone revenue.

Heading Into iPhone Supercycle?

Market players will be scrutinizing the earnings release, looking for confirmation of a new iPhone sales supercycle. Sales disappointed in the prior quarter but October’s iPhone 12 launch has been well-received, with analyst channel checks confirming surging demand that could rival the glory days of iPhone 6. However, COVID-19 has the power to undermine optimistic forecasts so a downside surprise can’t be ruled out.

Wedbush analyst Daniel Ives pounded the tables ahead of the report, noting “For the March quarter we believe builds for total iPhones ticked up again another 5% over the last few weeks and are now in the 60 million to 70 million range. For the June quarter we believe initial builds are in the low 40 million range with potentially an upward bias. We have not seen a launch uptrend such as this in a number of years for Apple and the only iPhone trajectory similar would be the iPhone 6 in 2014”.

Wall Street and Technical Outlook

Wall Street consensus has grown more bullish in the last three months, with an ‘Overweight’ rating based upon 23 ‘Buy’, 5 ‘Overweight’, 10 ‘Hold’, and 3 ‘Sell’ recommendations. Price targets currently range from a low of $74 to a Street-high $175 while the stock opened Wednesday’s U.S. session about $3 above the median $140 target. This placement suggests the earnings report will need to fire on all cylinders to generate sustained upside.

Apple rallied above the February 2020 high at a split-adjusted 81.96 in June and took off in a powerful trend advance that stalled in September at 137.98, just two days after the 4-for-1 stock split. A quick decline to 103.10 defined the lower end of a trading range, ahead of a steady uptick that’s now stretched about five points above the prior high. A rally toward 150 will confirm a breakout in this configuration while a selloff through 138 reinforces range resistance.

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