Apple: Will the stock follow a similar pattern as its FAANG companions or will it make the market better?   

31 October 2018 : The popular FAANG stocks ( Facebook( FB), ( AMZN ) , Apple, Netflix ( NFLX ) and Google parent Alphabet ( GOOGL )  has become the pied piper of the stock market, they led the market upwards, and are now leading the market down south. First one, to jump into the ocean was Netflix, in mid-October when the online streaming giant released its Q3’18 report and calmed the concerns over its subscriber growth, its stock shot up, albeit for short time, the stock has been falling ever since, and is now hanging below its pre-earning level. Three more FAANG stock have joined the bandwagon since, reporting a similar pattern. GOOGL has decline by 5% since it reported its earnings last week, AMZN plummeted by 15% on disappointing guidance, Although they did offer some share of optimism to its share holders, they stocks still nosedived amidst a broader sell-off. Facebook ’s results this summer put its stock on a downward spiral, and although the stock was pretty volatile in after-hours trading post releasing its results yesterday, today it is already up more than 5%. 

Apple, the last of its lot, is scheduled to share its Q3’18 results tomorrow. The stock is currently trading at $ 218 per share has gained more than 28% in 2018. That leaves Apple, scheduled to share fiscal fourth-quarter results Thursday afternoon. Apple stock, which closed Tuesday around $213 per share, has gained 26% in 2018.  Investors are now not just interested in the number of phones sold, and are digging deeper. Wedbush analyst Daniel Rose has an Outperform rating and a $310 price target on Apple stock, and believes that Apple’s report will bring good news—and not just for Apple. According to him “We believe Apple’s earnings and, more importantly, guidance around initial iPhone demand heading into year-end and its trajectory for 2019 will be a positive catalyst for Cupertino (and its investors) as well as the overall tech sector,”.

According to Factset, Wall Street is looking for quarterly earnings of $2.78 per share using standard accounting, and a penny more without it, on revenue of $61.43 billion. The company has guided investors toward revenue in the $60 - $62 billion range.

Meanwhile, iPhone sales are pegged at approximately 47 million, considering an average price of about $729. Apple just released three new phones last month, with XR being made available only late last week.

Interestingly, Apple’s market capitalisation is above the $ 1 trillion level it passed, with a massive fanfare, earlier this year. this makes the smartphone giant the largest holding firm in many passive strategies. Moreover it represents more than 4% of the S&P 500, about 6% of the Dow Jones Industrial Average and 13% of the NASDAQ-100 

Apple helps one determine the consumer technology spending.  For example, in Q2’18, I-phone boasted of an estimated 12% of the total global smartphone shipments Apple is a useful indicator of consumer technology spending. In the second quarter, for example, it accounted for an estimated 12% of total global smartphone shipments. 

Recently, Apple has been on the receiving end of quite a bit of backlash fueled by allegations that malicious hardware chips linked to Chinese espionage found their way into Apple hardware. Although the smartphone maker has denied the report, this topic may arise tomorrow in the management discussions. There is massive growth opportunity for the company from China. Wedbush’s Rose, for example, estimates that as many as 70 million Chinese iPhones could be poised for upgrades over the next 12 months. “The underlying growth opportunity out of this region is massive,” he wrote. And UBS analyst Timothy Arcuri believes fiscal 2019 iPhone unit sales could grow 2%; FactSet expects numbers closer to flat. “iPhone XS and XS Max interest is higher in Hong Kong compared with iPhone 8, which supports our view that China would be less of a drag and could see some growth,” Arcuri wrote on Monday.

But Bank of America Merrill Lynch analyst Wamsi Mohancited believes that currency fluctuations in the region may not yield the expected boost the company is hoping for. It’s “hard to believe that the weaker [Chinese] consumer environment, should it persist, is going to be helpful to Apple,” Goldman Sachs’ Rod Hall wrote last week.

Apple stock are still about 13% below Wall Street’s average price target, suggesting room for more than $130 billion in new market cap, and optimism that it can weather the possibility of a storm.“Among ‘mega’ cap technology stocks, Apple in our view remains a strong value pick, with the lowest price-to-earnings, and one of the lowest price-to-earnings growth, ratios,” JP Morgan’s Samik Chatterjee wrote Monday, “positioning it well to outperform if macro growth concerns continue to challenge the broader market.”

Reporting for EasyKobo on Wednesday ,31 October 2018 in Lagos, Nigeria

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