The Chance for a 10% Apple Rally

By Douglas A. McIntyre Updated Jan 13, 5:20AM EST · Published Jul 25, 8:15AM EDT

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The Chance for a 10% Apple Rally — © Thinkstock

Apple Inc. (NASDAQ: AAPL) stock has rallied more than 10% over a short time in the past. The most recent examples are October and November 2014 and February 2015. Apple shares have fallen 11% since April. Good earnings could get that figure back to zero, or even better.

Apple does not have to hit the numbers is did a year ago. The most recent quarter, which will be announced on July 26, are expected to be worse.

A large market research firm wrote:

Apple Inc. is expected to report earnings on 07/26/2016 after market close. The report will be for the fiscal Quarter ending Jun 2016. According to Zacks Investment Research, based on 14 analysts’ forecasts, the consensus EPS forecast for the quarter is $1.39. The reported EPS for the same quarter last year was $1.85.

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The consensus among Wall Street analysts is that Apple sold 40 million iPhones last quarter. Anything well above that would trigger a share rally. The same would hold true if sales in Greater China moved higher quickly. Apple management has said the region is the most critical to its growth. The market, however, is dominated by smartphone companies that sell products well below the Apple price point.

Another tipping point for perceptions about Apple is its smartwatch. The Apple Watch is the only entirely new product Apple has produced in years. Recently, data from research company IDC showed sales of the product dropped 55% from the same quarter a year ago and led the category with a 47% market share. However, the entire industry has fallen apart. Overall smartwatch sales dropped 32% in the second quarter, compared to the same period a year ago. Apple cannot count on its smartwatch sales as the catalyst for a rally.

Apple’s future stock price relies heavily on the date of the iPhone 7 launch and whether there is huge demand for the product. The launch is likely to be in the fall, so it will have no effect on the quarter just ended.

These figures from the earnings announcement mean only one thing can drive a rally of 10% or better. Sales of the iPhone 6 family have to be impressively above expectations.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.