Apple (AAPL) will obviously lead earnings report headlines Tuesday after the close because of its huge market capitalization and over-weighting in the major averages. The company is expected to report earnings of $1.80 a share compared with $1.28 a year earlier. It’s also expected to be the largest contributor to earnings growth for the info tech sector for the second quarter.
Without the lift from Apple, overall earnings for the tech sector would decline 6% over last year, according to FactSet data. The performance is driven largely by the success of the last two iPhone refreshes — raising the stakes for an iPhone 6S lineup later this year.
The company will try to sweep disappointing results of the Watch under the rug by finding some set of numbers that look impressive, but everyone knows it is a flop for the company so far. It’s OK; every product does not need to be a mega-hit right away. Wrist computing will eventually become a decent little niche; it’s just not there yet.
Meanwhile, there is something interesting happening technically with Apple shares. Again, a tip of the cap to Bespoke Investment Group analysts. They note that Apple shares over the past several weeks are trading in the narrowest range going back to 2000. While Google, Facebook and Netflix have broken out to new highs lately, Apple has been range-bound. To understand this range in context, Bespoke created a chart, shown below, that shows the 100-trading day range of AAPL going back to 1983.
As you can see, the only times since 1983 that the stock has traded in a 100-trading day range narrower than 15% were from 2010 on, and the current period which tightened to as low as 8.8% in early July is the narrowest on record. So how has AAPL’s stock fared following the prior periods where its 100-trading range narrowed to less than 15%? The analysts created the table below, and as you can see, the following one-, three- and six-month periods are quite strong.
Just as they say you should never short a dull market, Bespoke concludes, past experience suggests that you should never short a dull Apple. While the stock saw mixed returns in the month following the four prior occurrences, over the following three and six months, the stock averaged double-digit positive returns with gains every time.
Best wishes,
Jon Markman
