A lot will depend on Apple’s (AAPL) earnings this week after a recent surge to record highs in the stock.
AAPL: Weekly Chart
AAPL surged to trade just shy of $200, and the next path will be either a continuation move above that level or a retrace to the breakout level at $182.
The company’s upcoming earnings will be a big indicator of consumer appetite and are “critical for markets,” experts say. Apple will release after the market bell in Thursday’s US session.
“This week’s Apple earnings report is critical for markets, as Apple is not only the market’s most valuable company; it’s also a litmus test for consumer spending, which so far has been keeping the economy afloat, but we have been seeing some signs of a consumer slowdown,” Michael Landsberg, chief investment officer at Landsberg Bennett, said on Monday.
The latest US GDP report showed that personal consumption expenditures increased by 1.6% in the second quarter, which was a drop from the first quarter’s 4.2%. Shoppers spent more on services than goods during that period.
There has been a drop in inflation, which may lead to further pausing of the interest rate hike strategy, while the latest Biden plan to relieve student debt will also boost consumer sentiment.
Apple also announced a new Buy Now, Pay Later scheme earlier in the year, so consumers have more options available and an improving outlook.
“Apple’s earnings give a good indication of the state of the consumer, and investors will be looking to see if Apple’s quarterly year-over-year revenue continues to decelerate,” Landsberg added. Wall Street analysts in a survey by FactSet are expecting third-quarter revenue of $81.47 billion, which would be lower than the $82.96 billion in the same period last year.
Wedbush tech analyst Dan Ives also thinks Apple’s earnings will be an important indicator of consumer health.
“The entire Street will be laser-focused on Apple’s quarter, as when Cook talks, everyone else listens, given Apple’s unique perch and perspective around consumer demand globally and what this means for the path looking forward,” Ives wrote on Sunday. He maintained his Outperform rating on the iPhone with a $220 price target on the stock.
That is getting to an important level for traders as well, as Ives is one of the more bullish tech analysts and shows we are getting closer to a fair valuation and possible pullback.
