Apple, Inc. was the stock to own up until September of 2012. Having risen to a high of $702.41, it was the darling of anybody’s portfolio that owned it. However; what goes up, must come down.
A small group of people where reporting that Apple’s profit margins had to drop eventually. As competition rises, a company is forced to lower prices to maintain a high level of sales. This ultimately reduces the profitability. To offset the declining margins on existing products, a company must continue to innovate by coming out with new products that people want to buy. That has been Apple’s problem lately – they have nothing new.
Like every other tech company, they refresh their old product lines by adding some missing features, using new hardware, etc., but that’s not innovation, just progress. Apple didn’t become the most valuable company in the world by upgrading old devices and adding an ‘S’ after the name.
Tomorrow (April 23rd), Apple will announce its 2nd quarter earnings. There are 49 analysts covering Apple with a mean EPS of $10.07, a high of $12 and a low of $9.23. The stock has taken such a beating that good news could provide for a huge pop in price. However, if Apple misses or lowers future guidance, we could see the stock drop even lower.
There have also been reports that Apple may have to delay the anticipated iPhone 5S due to supply constraints. It’s this kind of news that has fueled the several month sell-off and could continue to do so.
What are the technicals telling us?
The stochastics indicate that Apple is at an oversold level. This is not uncommon for stocks that have experienced multiple months of negative closings, so it’s something to be weary of. In the past, Apple has seen slight increases once the stochastics reach a point that they are at now.
The three month red/green candlestick chart shows an interesting pattern that could symbol a reversal. On 4/19, Apple closed down for the day, but the stock finished higher than where it opened. Often times, this type of reversal can signal a changing trend. That would match up perfectly with tomorrow’s earnings announcement.