The Week Ahead to Aug 12: Opportunity with Apple? US CPI is ahead, and why it will likely be an investing catalyst
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Potential trading and investing ideas to consider
Apple's fall bites into the market – haunting investors. Some see it as an opportunity. What do you need to know?
1 - When Apple drops, the market shakes. But what happens when investors buy low-hanging fruit?
Consider that $Apple(AAPL.US$ makes up over 7% of the $S&P 500 Index(.SPX.US$, Apple makes up 27% of the S&P500 technology sector and 12% of the $Invesco QQQ Trust(QQQ.US$. So when Apple shares fall or rise, the market moves.. When Apple fell 8.7% from its high on weaker-than-expected results, the QQQ fell 4%, and the S&P500 technology sector lost 8.9% over the same time. Also consider Apple's market size has now fallen under $3 trillion. But what happens when investors buy the dip into Apple? Think about that. It will likely cause the ETFs and indicies menetioned above to move up.
2- The key considerations for Apple
$Apple(AAPL.US$ reported its 3rd quarterly drop in sales, and it sees another pullback in sales amid sluggish demand for iphones and computers. This triggered Apple's sell off. What's next?
- Apple shares should fall further but except dip buying to ramp up:
- If you were at a technical analyst, you'd see Apple's shares could see quant trading buying be triggered here, because from a technical perspective Apple's shares are in 'oversold territory'.
- Shorting volume dramatically picked up ahead of Apple's results, but fell like a stone after. This reflects that investment manager bet Apple's shares would see a hair cut, with global business conditions expected to worsen before improving.
- So this could mean, you might expect Apple's shares to maybe make a V shape move.
3- Consider cream rises to the top
The biggest growth in Apple business is from its Services division and Apple sales in China. But, consider Apple's revenue in both of these key growth areas, is only just getting started.
- We know Apple Services revenue hit an all time high. And yet some countries, such as Australia, have not yet rolled out all Apple services, such as BNPL
- Apple China sales are almost bigger than Apple's global services division.
China sales are growing at 8% YOY. We think China stimulus will step up. Just wait and see. China is currently experiencing the reverse wealth effect right now. But mega stimulus will be coming. Looking back at the last 30 years to see China talks the talk and walks the walk. When they say they are going to do something - they will do it. So, you could expect more rate cuts. And probably another major spending push to boost spending.
China sales are growing at 8% YOY. We think China stimulus will step up. Just wait and see. China is currently experiencing the reverse wealth effect right now. But mega stimulus will be coming. Looking back at the last 30 years to see China talks the talk and walks the walk. When they say they are going to do something - they will do it. So, you could expect more rate cuts. And probably another major spending push to boost spending.
- Apple's recent report didn't make mention of its EV launch. The market has not put a value on this yet. So does this mean Apple's share are undervalued, if you consider the future earnings power of its EV division?
- You have to remember that earnings drives share price growth. In most countries from 2050 if you want to buy a new car – you'll only be able to buy an electric one.
- Apple's car is due to be released in 2026, so if you are a long term investor, and are looking for earnings potential, that's a consideration.
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What is on the horizon for earnings this week?
- In the US, earnings releases are slowing. Focus will be on $Disney(DIS.US$, $AMC Entertainment(AMC.US$ and one of the worlds biggest gold company's $Barrick Gold(GOLD.US$ releasing earnings this week. For more click here.
- In Australia earnings season shifts into gear; with Australia's biggest bank, the $CommBank(CBA.AU$ reporting Wednesday August 9. The world's second-biggest gold company, $Newcrest Mining Ltd(NCM.AU$ reports on Friday, August 11. With $CommBank(CBA.AU$ results, focus on;
- net interest margin. This is the difference between what it pays out in interest from cash at bank, vs what it makes from lending money.
- Insights into how higher interest rates and inflation have negatively impacted people's financial positions and thus CBA's profit margins. Look for future impairments as a result.
- CBA's results will not only reflect that credit card growth is slowing, along with deposit growth, while lending is expected to be remain low. FY2023 is expected to show peak profitability in this cycle. And offer a 4% dividend yield.
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The two major economic events of the week and the implications.
In the US all eyes will be on inflation...
...with the soft-landing narrative to get another boost from the July CPI print. Two takeaways?
1- Expect headline CPI to support the Fed in keeping interest rates on hold in September and making no hike. Core CPI is expected to show prices roses 0.2% in the month. However, Bloomberg expects headline July CPI to have risen by 0.3%, amid higher energy prices from extreme summer heat. Year-on-year, CPI should edge up to 3.3% from 3.0% in June and will mark the first rise in headline CPI since June 2022, reflecting higher electricity and gas prices.
2- The expected lift in US CPI is a catalyst; to consider what higher moves in energy prices and energy demands could mean for your portfolio. Given El Nino will likely cause more record high temperatures, you can expect oil and gas companies to see higher earnings. And given OPEC sees oil being in a deficit this year, you’d expect higher profits in oil companies
In China, it will likely be a bad week for economic data...
...but will reflect that Chinese authorities need to hurry up and deliver the goods to boost demand, instead of promising stimulus will come. Chinese credit/borrowing growth is expected to slow, exports are expected to fall more steeply and the economy is expected to fall into outright deflation —with consumer and producer prices both dropping for the first time since 2020.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
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