Despite a mountain of doubt in the wake of softening sales, Apple Inc. (AAPL) has slowly been edging upward after bottoming out in late June. And with its next quarterly earnings report set to hit the Street on July 26, many investors who previously ditched AAPL stock are wondering if now is the time to buy back in.
Much of the positive action we’ve seen in the stock lately can be attributed to the success of Nintendo Co., LTD (ADR)’s (NTDOY) Pokémon Go app, which is sold in the Apple App Store.
Because AAPL retains around 30% of Pokémon Go’s revenue for iOS devices, the surprising popularity of the game adds a lot of upside potential to the company’s bottom line.
In fact, analysts at Needham forecast that the one app alone could generate $3 billion in revenue for AAPL over the next 12-24 months.
As a result, optimistic investors will be looking for some stronger-than-expected numbers in next week’s report to help counter the avalanche of downward earnings per share revisions from Wall Street. Meanwhile, management is hoping to avoid a disaster similar to last quarter, when the stock lost over 6% the day after earnings were released.
AAPL Stock Chart
Looking at the chart, AAPL rallied off a critical support level at $92 last month and is up nearly 9% in that timeframe, now hitting resistance around $100.
On May 26, AAPL closed at $100.41 before falling back to support levels. Then this Wednesday, the stock closed at $99.96 after hitting an intraday high of $100.46, which hints that there’s a good chance shares can close above that May 26 high.
If so, that means a breakout is in full force.
While it may seem like AAPL has been outperforming the market from its June 27 low to where it is today, it has actually matched the performance of the S&P 500.
Trading around the stock has become a little more rational in recent weeks, so while earnings may prove to be a slight disruption in the short term, I expect the positive trend to continue in the longer term.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks, the ETF Bulletin and Co-Editor of Breakout Stocks. As of this writing, he did not hold a position in any of the aforementioned securities.
