Apple will report financial results from its fiscal third quarter after the US stock market closes today.
Given its status as the largest stock on the S&P 500, with a market cap of over US$ 2.5 trillion, how markets react to its earnings could have an outsized impact on US stock markets overall.
As per market forecasts, earnings per share (EPS) for the quarter are expected to be $1.16 and revenues are expected to reach $82.76 billion.
Revenues are the results that present the most concern for investors, given the company’s previous guidance that earnings could’ve been US$4 – 8 billion higher if it wasn’t for these factors:
Despite the expected hit last quarter, there’s still hope for resilient earnings over the near-term.
Such optimism is predicated on how well consumers receive the new products presented at last month’s WWDC22 event, which is widely expected to pave the way for more products over the next 12 months.
While noting that Apple has a loyal customer base that is constantly upgrading to new products, investors still want to assess whether customers still have enough willingness and ability to purchase Apple’s products in the face of red-hot inflation and higher interest rates worldwide.
Apple’s share buyback programme could offer share price support
To be clear, Apple’s share price is still in negative territory so far this year (down 11.7% year-to-date). Still, that is better than the S&P 500’s 15.6% year-to-date drop, while Apple has also held up better than its peers such as Microsoft, Amazon, and Alphabet, with these other Big Tech stocks still down by more than 20% respectively so far this year.
As it announced last quarter, the buyback plan for up to $90 billion has likely contributed to Apple’s relative outperformance.
Keep in mind also that Apple had a stash of cash and cash equivalents of $192.7 billion as of the prior quarter (end-March). That shows that the company clearly has enough liquid funds at its disposal to even ramp up its share buyback programme, which might translate into more support for its stock price further down the line.
Apple aims to return to recent heights
Apple’s stock is making an interesting rebound since its recent cycle low at $129.07, which marked a 29.5% peak-to-trough fall from its record high registered on January 4th, using intraday prices. This stock has also broken out of its Q2 downtrend while resurfacing above key moving averages, with the 200-day SMA now in its sights.
If Apple is able to overcome its immediate resistance at 158.77 (SMA-200), then it could open up more upside until the next relevant resistance at 168.80. Of course, broader market sentiment must be conducive for such gains in US equities, considering the threat of a US recession looming.
Otherwise, if it does not continue with the current rise and breaks to the downside of the ongoing bullish channel, it would look for a first relevant support around $143.20 (SMA-50).