Last week, in anticipation of exceptional fiscal 2017 first-quarter results, the stock of innovative technology developer and iPhone manufacturer Apple Inc (NASDAQ: AAPL) rallied to record a 12-month high of $122.44. The company did not disappoint its investors and declared the best ever quarterly results in the history of the company. Buoyed by the holiday season, the sales of the iPhone 7, which had mixed reviews, exceeded analysts’ expectations. The overwhelmingly positive results took the share price to a new high of $130.44 yesterday. However, on the basis of the arguments provided underneath, we forecast a short-term correction in the stock.
The Cupertino, California-based company’s fiscal 2017 first-quarter revenue of $78.35 billion was not only higher than $75.87 billion reported in the same period last year, but also better than analysts’ revenue expectations of $77.25 billion.
For the quarter ended December 2016, the net income declined slightly to $17.891 billion, from $18.361 billion in the corresponding period of 2015. However, on a per-share basis, the 1Q17 net income increased to $3.36, from $3.28 in 1Q16, and higher than Wall Street consensus estimates of $3.21. The y-o-y increase in the earnings per share is basically due to a decrease in the number of outstanding shares.
Apple stated that it shipped 78.29 million units of iPhone in the first quarter. This compares with StreetAccount estimates of 77.42 million units. iPhone accounts for nearly 69% of the company’s total revenue. Apple’s service revenue of $7.17 billion also topped the Street’s estimates of $6.91 billion.
However, there were some concerns as well. The iPad unit sales declined to 13.1 million, from 16 million a year ago. Correspondingly, the revenue from iPad sales declined 22% y-o-y to $5.5 billion. The company’s revenue from other products, which includes WiFi routers, Beats headphones, AirPods, and Apple Watch, fell 8% y-o-y to $4 billion. Furthermore, Apple’s net income declined by 2.5% y-o-y in spite of an increase in revenue. This indicates that Apple had to incur higher marketing and operational costs to push volumes.
The company also issued lackluster guidance for the second quarter. Apple’s 2Q17 revenue outlook of between $51.5 billion and $53.5 billion was below analysts’ expectations of $53.8 billion. So, based on the above facts, we forecast a short-term correction in the stock of Apple.
The bearish shooting star candle (rounded with an aqua colored circle) indicates that the sellers are active near 130. An overbought scenario is also indicated by the near 100 reading of the stochastic oscillator.
So, a binary trader should invest in a low or below contract to gain from the anticipated short-term correction in the stock of Apple. The contract should be bought only if the expiry date falls between February 9th and February 11th. Furthermore, the exchange-traded price of the stock should not be less than 127 at the time of purchasing the contract.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
