Financial Market Research and Analysis

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Can Apple’s share price bounce back?
Apple will release its 1Q’16 results on Tuesday after the market close. The expectations are positive. The earnings per share is expected to have surged to $3.2342, this is 65% higher compared to previous quarter, $1.96. 

iPhone sales stood for 66.3% of revenues in FY’15, up from 38.6% in 2010 and the smartphone segment is still, and by far, the golden goose. Rising competition in the smartphone and tablet business is of course an important threat for the company, nevertheless Apple is still a front-runner in the smartphone business. The company  is  preparing the launch of a smaller iPhone ‘5se’ with an improved camera  aiming to boost demand for its most popular product in a bid to stay ahead of the game.

Apple Pay is officially live in Canada, Australia, and the United Kingdom in addition to the US, but the rollout of banks in other regions has lagged behind the US rollout considerably. By some, it is considered the leader amongst mobile payment solutions and with new features being rolled out, 2016 might help cement this view.

Economic slowdown worries 
Asia Pacific market (including Australia and Asia but excluding Japan) is a growing market and generated 31.6% of revenues in 2015 compared to only 12.7% in 2010. And despite the slowdown worries regarding China and emerging Asia, Apple managed to increase its yearly revenues by a solid 84% in 2015.

On the other side of the coin however, the forecasts reveal some concern regarding future releases. Digging deeper into analysts’ predictions, the gloomy economic conditions are reflected as 3.93% decrease in Q2’16 sales, with 3.16% decline in EPS. The pre-tax profit is seen more than 10% lower in Q2 with EBITDA down by 5.32%. The price-to-EPS is on a clear downtrend. From 11.02 over the last four quarters, the Price/EPS is expected to slide to 10.68 over the next four quarters and gradually down to 8.93 into 2018.

Dividends trend higher 
All information being factored in, Apple’s dividend yield is seen on a solid up-trending path. From $1.95 over the past four quarters, the company is expected to pay $2.11 dividend over the next four quarters, $2.14 in FY’16, $2.25 in FY’17 and $2.45 in FY’18.

Technically…
Apple shares outperformed the Dow Jones index by a clear majority of 2015. Mid-December saw the Apple’s performance weakening. Apple shares traded the majority of January 2016 below $100 for the first time since the dramatic down-spike to $92 in August. Following recovery reinvigorated appetite and encouraged a recovery to $123.82. The enthusiasm was short-lived however and the second wave of sell-off pushed the share price into a bear market; Apple shares dived 24.55% since November 4th peak.

From a technical perspective, the recovery is underway after January 20th dip to $93.42. Trend and momentum indicators point at further gains. The MACD has moved into a positive area, the minor 23.6% on May’15-Aug’15 is being tested before the earnings release. The critical short-term resistance is eyed at $105 (major 38.2%). Breaking above this level, the stock price should enter in bullish consolidation zone.

The analyst coverage is clearly upbeat. Buy/Hold/Sell: 45/6/1 with 12-month average target price at $141.21.  

Watch full video analysis with LCG Analyst Ipek Ozkardeskaya above to find out more.

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