Apple’s Range Is Tightening as Earnings Approach

2020年4月28日

Apple's range is tightening with earnings due on Thursday afternoon. Is a breakout coming?

The iPhone maker has stayed above its 8-day exponential moving average since the market jumped back to life on April 6. There were a few tests below it, but now that line is squeezing up to the top of the recent range around $288.25. It’s also near the 100-day simple moving average (SMA).

A tight pattern like this, especially with waning volume, suggests traders may be waiting for quarterly results to jump in. Notice how the 5-day Average True Range (ATR) is back to its tightest reading since February 21, immediately before the coronavirus selloff began.

AAPL is also holding above its 50-day SMA. The stock had a false breakdown under that line on April 21, but it quickly rebounded and has stayed above it since.

From a fundamental perspective, Wall Street seems fully aware that coronavirus will hurt both supply and demand. IPhone production was delayed by factory outages. Big hits to income from the millions of lost jobs will also weigh on unit sales. But how long will those headwinds last?

Investors seem to be looking out a little further in time and seeing Tim Cook’s initiatives paying off: Cheaper phones draw more users into AAPL’s growing services business. That’s a positive for valuations because recurring revenues tend to command higher multiples than hardware sales.

AAPL has pursued that strategy lately by releasing the iPhone SE for $399. It also rolled out services like App Store and iCloud in 20 more countries across Africa, Europe and the Middle East.

In conclusion, AAPL has made several major transformations over the years: First from Macs to iPods. Then, from iPods to iPhones. Now it’s evolving from iPhones to services. The result is a stickier business model with more operating leverage. Covid-19 or no Covid-19, the progress seems on track.