Where is Apple headed?

A scientific wild-assed guess posted here Wednesday by friend-of-the-blog Bartley Yee:

Robert Paul Leitao: Bart, Do you see the last two days of trading as a bear market rally or the start of the market turning higher?”

Bartley Yee: "Ah, the crystal ball, she is somewhat cloudy”  SWAG [Scientific wild... etc.], I think there will be some slow choppy movement higher for AAPL and by extension, any indexes which Apple is part of. This will work towards earnings on October 27. There may be dips with any negative economic, Russian War, or further news. I expect a trading range between $137-$157, maybe $160. Selling pressure from RMDs [required minimum distributions], year-end expenses and maybe tax harvesting will keep a lid or ceiling on maximum price gains.

Now when and what Apple reports for Q4 earnings and Q1 guidance will determine the rest of this quarter’s trajectory, at least from Apple’s business side.  IMO, as long as Apple and the market feel Apple’s fundamentals are reasonable, there will be support price wise long term. There will be many to paint whatever is said in a negative light so sentiment is fragile until inflationary pressures are reduced to the Fed’s satisfaction.  An October event and persistent positive demand would be good news.

But if Apple misses or guides negatively, the market will not be kind, and the indexes concurrently will suffer.  No matter what, we will repeat this cycle of thought again in early to mid Q2 2023 as Q1 earnings come into play and the Russian-Ukrainian war drags to a 1 year period.  Of course, any major escalation like tactical nuclear weapons use would be a black swan event for financial markets and a huge external monkey wrench.  Same with any worsening or deadliness of Covid.

My take: Sounds about right to me.

11 Comments

  1. Daniel Epstein said:
    Always tough to guess the trading range. Of course I think 170 is likely the upper part of the range but 160 wouldn’t surprise me. I always think Apple trades with a wider range even in normal times. Some people will really complain if Apple reports good results and good guides as they are waiting for Apple to cut estimates going forward. It would be quite an achievement for the company to maintain growth in this environment. That would indicate a more fundamental shift towards Apple’s ecosystem than many analysts expect. And if there is actually any good news watch out.

    2
    October 5, 2022
  2. Fred Stein said:
    Short term headwind. But OK long term.

    Per WSJ today. Mortgage rates approaching 7% is resulting in a single family housing glut. Private equity is snapping up inventory at 10% to 20% discount to retail. This will ripple through the economy, likely impacting all assets. BUT…

    Apple’s fundamentals will remain in tact for the reasons we’ve all noted. Investors will pile back into AAPL for the safety and the long-term upside. The trajectory and timing remain unpredictable.

    1
    October 5, 2022
  3. Michael Goldfeder said:
    I expect another solid to great earnings report on the 27th. Quickly followed by the standard: “Pull forward sales”, and other assorted naysayers regarding consumer spending is down; iPhone 14 provides nothing new; and the Ultra iWatch only serves a niche market and doesn’t move the needle; and of course the oldest and most parroted comment used; Apple no longer innovates since Jobs passed!

    4
    October 5, 2022
  4. Robert Paul Leitao said:
    The reason I posed the question to Bart is because the strong market performance on Monday and Tuesday may have been a “bear market rally” which are common as the indexes and equity prices move lower in a bear market trend. Perhaps the market action earlier this week was false confidence the FOMC would diminish the size of the increases in the Fed Funds rate following the remaining meetings in 2022. As interest rates move higher, the present value of future earnings are diminished and it raises the opportunity costs of investing in equities. With 2-year Treasuries now offering greater than 4% yields, for example, there’s currently more competition for investor dollars from other asset classes. I agree with Fred. At this time Apple’s fundamentals remain strong.

    2
    October 5, 2022
    • Bart Yee said:
      @Bob Thanks for your thoughtful questions and the civil exchange of answers and discourse, it’s what sets PED30.com apart from most other AAPL financial forums (that and NO spam postings!).

      1
      October 5, 2022
  5. David Emery said:
    I think there are -2 sets of numbers- to track:
    (1) How AAPL does in absolute terms
    (2) How AAPL does vs S&P 500 (and other indexes)

    If there’s general market decline of, for example 5%, but Apple goes down only 2%, to me at least that’s a 3% win for Apple.

    But I completely agree that Apple guidance (if any) for the next quarter will be really important. We’re coming into Apple’s 2 big quarters.

    2
    October 5, 2022
  6. Bart Yee said:
    Here’s my other response about any AR product reveal:

    “I personally do not think this is the time to introduce any new AR products now, there are too many negatives to consumer demand for a new high priced device to compete for discretionary dollars. The other reason is there has not been articulated the killer Apps and use cases for AR AND this would provide more time for Apple to get BOM prices lower over time.”

    Brother Joseph responded “I don’t agree. Any product Apple introduces will be snapped up from the get-go. And it will, as always, take time for Apple to ramp up production.

    If they’ve got it, I think it would be a big mistake to just sit on it.”

    I respect that viewpoint but IMO Apple has understood most of the time when they have the right product, the right supply chain, and the right market & conditions to introduce a potential “disruptive” new product or service. I don’t disagree that many well heeled Apple fans would snap up AR devices to be bleeding edge adopters.

    My concern is when is the market ready and large enough plus ready and able to buy? The former is debatable, but the latter is fairly negative with many competing demands on disposable income, especially for an initially high value (>$1500) device with, to many, an unfamiliar use case outside of gaming.

    I could see Apple using WWDC 2023 to showcase use cases and Applications for ARKit and give real world demonstrations of how users could enjoy or benefit from such a device or AR applications. For example, using AR to inform users w/digitized information on surroundings while walking, driving, or cycling – on a mobile device, face worn, verbal, in car or projected heads up display (HUD) via CarPlay. Similar interaction with wide ranging live or recorded streaming or location experiences, training exercises, or live sports.

    IMO Apple needs to help “prime the pump” of demand by explaining and demonstrating why and how this tech advancement could by useful and attractive. Then both developers and consumers could be intrigued by the possibilities.

    1
    October 5, 2022
    • Robert Paul Leitao said:
      Bart: I appreciate your comment. In my view, emphasis and focus should be placed on Apple’s fundamentals and not conjecture and speculation on when the company will release the next “one more thing” and it’s assumed benefit to revenue and net income. Assuredly new products and services will come in time and when Tim Cook & Co. believe they are ready for release. In my view, Apple’s fundamentals remain strong in the context of slowing global economic growth and now the probability of a recession in 2023. Can a relatively strong fiscal performance by Apple appreciably lift the share price in a bear market environment? I’d like to know the views of Apple 3.0 subscribers on this question.

      1
      October 5, 2022
  7. Gregg Thurman said:
    in the context of slowing global economic growth I ask slowing from what? An unbelievable amount of QE was unleashed on the US economy during 2020 and 2021. As it was happening I was in favor of it, but now, in hind sight, I think Congress and the FED went way too far. All that easing is now augmenting the inflationary pressures caused by the Ukraine war as weaponry is replaced and Ukraine is rebuilt. Draconian efforts to control it are going to result in wild swings in our economy. But wii it truly slow from history growth rates?

    2
    October 5, 2022

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