Apple (AAPL) Implied Move Suggest Slight Price Upside Move Post Earnings If iPhone Sales Could Surprise!

Analysts from Barclays and TF International Securities have downgraded Apple’s stocks in early January and also predict 15% decline in iPhone shipments respectively. This has cause Apple shares to decline by 3.5% in January.

Wall Street is expecting Apple to report earnings per share of $2.11 on revenue of $117.9 billion, according to estimates compiled by Bloomberg. That would mark an increase from last year when Apple reported EPS of $1.88 on revenue of $117.2 billion.

From the technicals side, we are seeing that Apple is experiencing a bearish MACD crossover. This could mean that investors are planning to sell if the reported quarter does not show signs of improved sales in all its segment, with iPhone being the main one.

MACD has fallen below the signal andit is a bearish signal, which indicates that it may be time to sell.

AAPL last reported earnings on 02 Nov 2023 after the market close (AMC). AAPL shares gained +0.6% the day following the earnings announcement to close at 176.42. Following its earnings release, 90 days ago, AAPL stock has drifted +4.5% higher.

From the time it announced earnings, AAPL traded in a range between 175.98 and 199.62. The last price (184.40) is closer to the lower end of range.

Estimated implied straddle for upcoming earnings is 3.8%. We might see a very small price change post earnings based on what the past implied straddle is showing us.

The options market overestimated AAPL stocks earnings move67%of the time in the last 12 quarters. The predicted move after earnings announcement was±3.7%on average vs an average of the actual earnings moves of3.4%(in absolute terms).

This would mean that Apple option valuation could be overvalued, and with the IV trending higher, we might expect slightly higher price move as investors are slightly confident about AAPL earnings.

We could interpret this as increased uncertainty and adjust our strategy accordingly, perhaps by using options to hedge our position or by reducing our position size to account for the higher potential risk.

AAPL's last earnings implied volatility (IV30) going into earnings was25.3. The last time AAPL released earnings, the implied volatility dropped to19.0, resulting in an implied vol crush of25%. 5 days after earnings, the 30 day IV was17.2.

Average Implied Volatility Crush For AAPL Earnings:18%

Average 30 Day Implied Volatility 1 Day Before Earnings:32.8

Average AAPL 30 Day IV for the Day of Earnings:26.9

Average 30 Day Implied Volatility 5 Days After Earnings:25.6

AAPL historically moved higher heading into earnings more often than not. On average, the stock gained 2.1% for the 2 week period before earnings (based on the last 12 quarters of data).

AAPL shares have moved higher in the immediate aftermath of earnings 6 out of 12 previous reports. On average the stock moved up 0.9% in the first day of trading after the company reported earnings.

Based on the previous 12 earnings releases, AAPL is more likely to trade lower 1 day after earnings for an average loss of -0.6%

AAPL share price has drifted up 4.5% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 3.9%. The current drift represents a positive 0.4 standard deviation move.

Current post earnings announcement drift:4.5%

Historical average post earnings announcement drift:3.9%

Historical post earnings drift standard deviation move:±10.7%

Based on how Apple stock price could be affected by prediction of its iPhone shipment, the number of iPhone sales in China particularly might be affected as China is facing youth unemployment, The highest consumer age group is these youth, which might have done revenue purchasing in the last quarter post COVID.

Situation have changed now, as China youth are beginning to move towards saving, so preference for cheaper handset might pose an issue to Apple iPhone sales number. But Apple should still be able to get sales number from other markets like US, India and Southeast Asia.

But I will be cautious and monitor its price action as Apple stock just have bearish MACD signal appearing.

Appreciate if you could share your thoughts in the comment section whether you think Apple would be able to cover back its iPhone shipment to other regions, could Apple other segment provide better earnings?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.