Is Apple Stock A Buy Before Its June-Quarter Earnings Report?

Apple (AAPL) has seen its shares surge into record high territory ahead of the consumer electronics giant’s June-quarter earnings report. But with Apple stock at this level, many investors are wondering if AAPL stock is a buy right now.




X



Apple has been an American success story several times over. First, it ignited the personal computer revolution in the 1970s with the Apple II. Then it reinvented the PC in the 1980s with the Macintosh.

Co-founder Steve Jobs returned to run Apple in 1997 and oversaw a winning streak of innovations that included the iMac, iPod, iTunes, iPhone, iPad and the App Store.

The biggest driver of Apple’s modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.

But iPhone sales have slowed as users hold on to their handsets for longer periods between upgrades. However, the company could be in the midst of a major upgrade cycle with its first 5G iPhones.

Apple Stock News: Privacy Initiatives

The Cupertino, Calif.-based company began selling the 5G-enabled iPhone 12 series on Oct. 23. The handsets have display sizes of 5.4, 6.1 and 6.7 inches and starting prices ranging from $699 to $1,099.

In addition to ultrafast 5G wireless connectivity, the 14th-generation iPhones have improved cameras, speedier processors and a new design. The Pro models of the iPhone 12 have a new rear-facing lidar scanner. Lidar, short for “light detection and ranging,” permits depth sensing for photo and video applications, including faster autofocus in lowlight situations. Plus, it will open up new possibilities for augmented-reality experiences.

Apple debuted the iPhone 12 series at an online event on Oct. 13. However, investors were unimpressed. Apple stock fell 2.7% the day of the iPhone 12 debut. It was Wall Street’s worst reception ever to an iPhone launch.

Sales reports have been positive, especially for the more expensive models of the iPhone 12 series. But there are signs of a slowdown in iPhone 12 sales, starting in the June quarter.

Meanwhile, Apple introduced its first Apple Silicon-powered iMac desktop computers and new iPad Pro tablets on April 20. It also unveiled its long-awaited lost item trackers called AirTags. However, Apple stock sank 1.3% after its spring product launch event.

At the company’s annual Worldwide Developers Conference, which ran June 7 to 11, Apple previewed new privacy protections for users of its devices. Apple will mask a user’s location and activity in its email app and on the Safari web browser. It also will provide more detail on how apps are using personal data through its App Privacy Report. Apple stock rose modestly for the week.

Apple Opportunities For Growth

With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.

Lately, two businesses have given Apple’s sales and profits a boost: services and wearables.

In the March quarter, Apple’s services revenue rose 27% to $16.9 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.

Meanwhile, Apple is facing antitrust scrutiny in the U.S. and Europe for its App Store policies, including its 30% commission fee. On Nov. 18, Apple cut its commission rate to 15% for small developers, possibly to appease regulators. But Apple stock trended down in the days after that news.

On April 30, the antitrust commission of the European Union issued preliminary charges against Apple in a case initiated by a complaint from Spotify Technology (SPOT). The European Commission accused Apple of abusing its dominant position in the distribution of apps through its App Store. Apple stock fell 1.5% on the news.

In May, Apple defended itself in U.S. federal court in a case brought by Epic Games, which accused the tech giant of anticompetitive business practices with its App Store. The judge in the case will make a ruling sometime soon.

The company’s regulatory and legal concerns are an overhang over Apple stock, Wedbush Securities says.

Apple Car Rumors On The Rise

Apple’s Wearables, Home and Accessories unit saw sales increase 25% to $7.8 billion in the March quarter. This unit includes wearables like the Apple Watch, AirPods wireless earbuds and Beats headphones. It also contains the Apple HomePod Mini wireless speaker and other miscellaneous gadgets.

Meanwhile, speculation has risen that Apple is looking to make a self-driving electric car. Those rumors picked up steam in January when Hyundai reported early discussions with Apple about a car partnership. Apple also has held talks with Nissan and other automakers, according to news reports.

On June 10, Bloomberg reported that Apple hired Ulrich Kranz, a former BMW executive and the recently departed chief executive and co-founder of electric-vehicle startup Canoo, to work on its Apple car venture. Also, Reuters reported June 8 that Apple is in early-stage talks with China’s CATL and BYD about supplying batteries for its planned electric vehicle.

But the Apple car rumors haven’t done much to lift Apple stock.

Apple Earnings: Beat And Cautious Guidance

On April 28, Apple delivered a blowout March-quarter report. But Apple stock dipped a fraction after the earnings report.

Apple earned $1.40 a share on sales of $89.58 billion in the quarter ended March 27. Analysts had predicted earnings of 99 cents a share on sales of $77.35 billion. On a year-over-year basis, Apple earnings surged 119% while sales rose 54%.

In the March quarter, iPhone revenue soared 66% to $47.94 billion. Apple’s iPhone business accounted for 53.5% of the company’s sales in the period.

Meanwhile, Mac computer sales surged 70% to $9.1 billion and iPad tablet sales jumped 79% to $7.8 billion. The work-from-home and school-at-home trends driven by the Covid-19 pandemic fueled the gains in both product categories.

Apple did not issue specific guidance for the June quarter, citing market uncertainties related to the coronavirus pandemic. However, the company said it expects a more dramatic seasonal sales decline from the March quarter to the June quarter than in prior years.

The next potential catalyst for Apple stock likely will be its fiscal third-quarter earnings report, due July 27.

Exclusive Apple Stock Ratings

Apple stock has perked up lately. It has rebounded from a sell-off that occurred after its March-quarter earnings report.

AAPL stock has an IBD Relative Strength Rating of 67 out of 99. The Relative Strength rating shows how a stock’s price performance stacks up against all other stocks over the last 52 weeks.

Apple stock has an IBD Composite Rating of 97 out of 99, according to the IBD Stock Checkup tool. IBD’s Composite Rating combines five separate proprietary ratings of fundamental and technical performance into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

In August 2018, Apple became the first company to reach a market value of over $1 trillion. Since it hit that milestone, Microsoft (MSFT), Amazon.com (AMZN), Google-parent Alphabet (GOOGL) and Facebook (FB) have joined it in the trillion-dollar club.

In August 2020, AAPL stock became the first company to reach a market cap of $2 trillion. Microsoft hit the $2 trillion milestone on June 22.

AAPL Stock Technical Analysis

Apple stock got a boost on Nov. 30 when investment bank Morgan Stanley said the company is one of the best 5G wireless investment plays.

On Jan. 22, Apple stock broke out of a cup-with-handle base at a buy point of 138.89, according to IBD Leaderboard analysis. Apple stock notched a then-record high of 145.09 on Jan. 25 on expectations for a strong holiday-quarter report.

However, AAPL stock dropped following its December-quarter earnings report and fell out of the buy zone. On Feb. 17, Apple stock triggered a stop-loss sell rule, according to IBD trading principles.

On June 30, Apple stock hit a buy point of 137.17 out of a cup base, according to IBD MarketSmith charts.

Is Apple Stock A Buy Right Now?

Apple stock is not a buy right now. It is trading above the 5% chase zone of its recent breakout, which extends to 144.03. AAPL stock ended the regular session on July 13 at 145.64.

On July 9, AAPL stock reached another buy point of 145.19 out of a 23-week consolidation pattern, based on a weekly MarketSmith chart. In intraday trading on July 14, Apple stock hit a record high of 149.45.

Apple stock has an IBD Accumulation/Distribution Rating of B, indicating institutional buying of shares.

Keep an eye on the overall stock market. If the market turns south, don’t try to fight the general stock market direction.

To find the best stocks to buy and watch, check out IBD’s Stock Lists page. More stock ideas can be found on IBD’s Leaderboard, MarketSmith and SwingTrader platforms.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

YOU MAY ALSO LIKE:

Is Microsoft Stock A Buy Right Now? Here’s What IBD Charts Show

Is Roku Stock A Buy As Company Starts Streaming Former Quibi Shows?

Find Compelling Growth Stocks With IBD’s Stock Of The Day

Catch The Next Big Winning Stock With MarketSmith

Get Stock Ideas From IBD Experts Each Morning Before The Open

William Murphy

William Murphy

Related post