Apple Stock, Though Stagnant, Is Still Buy-Worthy on Any Dip

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If you thought the first half of 2015 was a busy one for Apple (AAPL), you haven’t seen anything yet. The second half of the year is going to be a whirlwind of new product and service releases, as well as the first chance owners of Apple stock will have to decide if the Apple watch was fiscally worth all the fuss.

How are all these new items on the menu going to affect upcoming quarterly reports from AAPL? Analysts are decidedly positive, though of history is any indication, they may not be optimistic enough. On the other hand, great forward-looking results don’t necessarily make Apple stock a buy at its current price, in its current situation.

The Good News: Fundamentals

As of the latest look, analysts are looking for earnings of $1.77 per share on $49 billion in sales when Apple reports last quarter’s earnings on July 21. That’s a sharp improvement on the $1.28 per share of Apple stock the company earned the same quarter a year earlier, when it produce $37 billion in sales.

Don’t be too impressed, however. Remember, the latest iteration of the iPhone (the iPhone 6) didn’t launch until September of last year. Not only is the company still driving sales from that new product, the top line may have been particularly crimped in the year-ago quarter as would-be iPhone buyers were holding out for an iPhone 6.

Also, though it was never seen as a complete-game changer for AAPL, last quarter was the first in which sales of the much-ballyhooed Apple watch were booked.

While the Apple stock price is sure to catch something of a tailwind on the heels of a 38% uptick in year-over-year quarterly earnings, it’s just the beginning of what should be a long string of top- and bottom-line growth.

The charts tell the tale. The pros say we should see two more quarters of big-time growth, after which things should taper off again as we wait for the next big product launch … the iPhone 7.

Apple revenue, trailing and projected
Click to EnlargeApple earnings, trailing and projected
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The outlook, though, may be too pessimistic in light of everything Apple’s got in the hopper.

Even if they’re not earth-shattering, two meaningful product launches from Apple in the foreseeable future may just move the needle more than investors are currently expecting.

The first one is, of course, the debut of a subscription-based cable television service that will, for the first time, allow TV viewers to watch network broadcasts (NBC, CBS, etc.) over the internet. This is the proverbial “big one” that could accelerate the cutting of the cord, begin the displacement of the $80 billion worth of advertising revenue cable television garners every year in the U.S. alone.

The other — albeit lesser — upcoming product launch that could be a surprisingly significant success story is the recent launch of Apple Music. Whereas iTunes is built around the premise of premise of buying perpetual access to one song, Apple music as akin to services offered by the likes of Pandora (P) or Sirius XM (SIRI).

The Bad News: Technicals

While Apple clearly has some new initiatives working in its favor right now, that doesn’t necesarily mean the Apple stock price will move higher. In fact, some clues suggest the path of least resistance from this point is to the downside.

We’ve seen the Apple stock price rise nicely for months now. All told, AAPL is up 122% since June of 2013. There’s such a thing as too much, though, and Apple stock may be about to prove that (again).

A quick glance at a chart of Apple stock reveals that it has been range-bound for a while. Even within the midst of that trading range, however, AAPL has suspiciously fallen below several key moving average lines including the 100-day line (gray). That’s the first time the 100-day moving average hasn’t spurred a bullish bounce-back in months, which should be a serious concern.

If Apple stock stumbles below the lower edge of the current trading range — at $124.62 — that’s a good sign that this trading pendulum is finally swinging the other way.

Apple stock price chart
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Don’t misunderstand that premise. Even if the Apple stock price begins to fall sharply, it’s still not necessarily an indication of the company’s long-term health. Sometimes stocks just take on a trading life of their own. Either way, a revisit of the 200-day moving average line (green) would be a great re-entry opportunity.

Bottom Line for Apple Stock

While the stock has been stagnant for a bit, and even teetering with a pullback, the longer-term outlook for Apple is still a compelling one.

The advent of Apple’s cable television service is likely to be far more fruitful than anyone expects. In the meantime, Apple Music is also positioned to get good traction. And just when its cable television launch is cooling off, the iPhone 7 debut will be in sight.

Putting it all together, AAPL has pretty much secured its spot on the pedestal for at least another three quarters.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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