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Is Apple turning sour?

26 Sep 2022 05:51 PM

Apple’s share price rallied in late July as the third-quarter numbers topped forecasts, but the stock has been sliding since because of the wider sell off in the markets. Central banks around the world have been hiking interest rates and that has lifted bond yields, and the rise in yields in hurting stocks. Last week, the NASDAQ 100 came close to retesting the lows of July, which was the lowest mark since September 2020. The fact that Apple’s share price is still comfortably above the lows it saw in June, underlines how it is outperforming the broader tech sector.

Even though the economic backdrop is not as rosy as it was one year ago, Apple still manged to deliver an impressive set of third quarter numbers in July. EPS was $1.30, which hammered the $1.01 forecast. On an annual basis, revenue jumped by 36% to $81.41 billion, topping the $73.30 billion estimate. Revenue from iPhone sales jumped by almost 50% to $39.57 billion, while services revenue was $17.48 billion, up 33% on an annual basis. Is encouraging to see that revenue from services now equates to roughly 45% of that derived from iPhone sales. This bodes well for Apple because as it determined to move more towards services as a way of diversifying its business. Revenue from iPads and Macs increased by 12% and 16% respectively on an annual basis. Gross margin topped estimates as it was 43.3%, beating the 41.9% anticipated.

The tech giant stopped issuing guidance since the pandemic set in, but it did predict that that fourth revenue growth would be in the double digits in terms of percentage growth. In the three-month period, sales in the US increased by 33%, while revenue from greater China – mainland, Hong Kong, and Taiwan – surged by 58%, but that was coming from a low base because of the strict lockdowns. Supply chain issues continue to weigh on the company as Tim Cook, the CEO, warned that constrained access to computer chips will hurt iPad and iPhone sales in the near-term.

Apple’s share price rallied to four month high in August, as the upbeat quarterly in July boosted the stock, but since then it has retreated a little. While the stocks holds below the $160.00 area, it is possible the near-term bearish move will continue. Support could come into play at $140.00, and a break below that area could see it target $133.00.  If the stock rallies from here, it could retest $160.00, and pave the way for it to target $165.00 or $170.00.

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