Will Apple Stock See a Boost from Planned Events?

With shares of Apple (NASDAQ:AAPL) trading near $500, is AAPL an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Apple designs, manufactures, and markets mobile communication and media devices, personal computers, portable digital music players, and a variety of related software, services, peripherals, networking solutions, third-party digital content, and applications. The company’s products and services include the iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and further accessory, service, and support offerings. Apple also delivers digital content and applications through its iTunes, App, iBook, and Mac App stores.

Apple announced what everyone was expecting. It will unveil its new iPhone models at an event on Tuesday. Cantor Fitzgerald has a buy rating on the stock and a price target of $777. Cantor said the stock is on its way to a recovery after a challenging year. In a note seen by MarketWatch, the firm said Apple is “on the verge of an extended product cycle that we believe will include a refresh of existing products, increased penetrating with existing device categories, and entirely new market opportunities.”

T = Technicals on the Stock Chart Are Strong

Apple stock has struggled in the last year. However, the company managed to stabilize earlier this year. The stock has currently broken above a solid base and looks poised to move higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Apple is trading above its rising key averages which signal neutral to bullish price action in the near-term.

AAPL

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Apple options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Apple Options

30.55%

80%

78%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Apple’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Apple look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-19.85%

-17.97%

-0.43%

23.03%

Revenue Growth (Y-O-Y)

0.86%

11.27%

17.65%

27.22%

Earnings Reaction

5.13%

-0.16%

-12.35%

-0.90%

Apple has seen decreasing earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been pleased with Apple’s recent earnings announcement.

P = Weak Relative Performance Versus Peers and Sector

How has Apple stock done relative to its peers, Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), BlackBerry (NASDAQ:BBRY), and sector?

Apple

Google

Microsoft

BlackBerry

Sector

Year-to-Date Return

-6.28%

22.53%

16.72%

-12.80%

11.76%

Apple has been a relative weak performer, year-to-date.

Conclusion

Apple is an innovator that works to provide appealing products and services to consumers and companies worldwide. A flurry of positive headlines, including planned events, have pushed the stock higher and may continue to do so. The stock has now broken above a base established earlier this year. Over the last four quarters, earnings have been decreasing while revenues have been rising. Relative to its peers and sector, Apple has been a weak year-to-date performer. Look for Apple to pick it up and OUTPERFORM.

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