Earnings season is in full swing, and Apple (NASDAQ:AAPL) is scheduled to report its Q4 and full year 2023 earnings post-market on Feb. 1. While many may be hoping that AAPL stock (trending lower lately) bounces back post-earnings, I wouldn’t rule out the possibility of a post-earnings decline.
Why? Over the past two months, bullishness for the tech giant’s shares has faded. As I have discussed previously, analysts and investors are concerned about two things. First, the prospect of slowing growth. Second, the stock’s current valuation, which some skeptics say is too high given growth forecasts.
With this, the market may use any negative aspect to Apple’s latest results and updates to guidance as an excuse to sell. Yet while that’s bad news for anyone looking to place a short-term trade ahead of and after earnings, for long-term investors, a post-earnings sell-off could prove advantageous.
AAPL Stock and Q4 2023 Earnings
For three consecutive quarters, Apple has beat on earnings. A majority of sell-side analysts have also made upward revisions to their Q4 2023 estimates ahead of this latest earnings release. This may mean that the company once again delivers results ahead of expectations.
Unfortunately, an earnings beat does not guarantee that AAPL stock will rally in the trading days following earnings. Outlook, not the prior quarter’s results, will be the focus. In particular, as market commentators at Barron’s and other publications have opined, more attention will be paid to iPhone sales outlook for the current quarter.
If updates to iPhone outlook fail to assuage concerns about heavy smartphone competition in China, this could elicit a negative reaction from investors. A lack of updates regarding the company’s plans to capitalize on the generative AI trend may also increase the chances shares sink rather than surge after earnings.
Since the sentiment took shape a month and a half ago, AAPL has pulled back only slightly (around 7.1%). However, a poorly received earnings release could accelerate outflows, resulting in another round of modest price declines.
A Silver Lining for Long-Term Investors
Not only could AAPL stock tank again after this week’s earnings release. Shares could stay in a slump in the near-term. With the market much more bullish on “Magnificent Seven” stocks with high generative AI exposure, and less so on names with less exposure to this growth trend, an immediate rebound for Apple is highly questionable.
That said, don’t assume that means you should throw in the towel, if you currently hold a position. Nor is this a reason to avoid shares completely, if you’ve yet to buy. Again, there may be a silver lining to the latest souring of sentiment for AAPL. The opportunity to add to or enter a new position at a more favorable price may emerge.
I’m not saying that AAPL will crash down to bargain basement prices. However, depending on how long this latest wave of bearishness continues, a retreat to $175, $160, maybe even $150 per share is very much well within the realm of possibility.
Over a multi-year time frame, buying in at such price levels could prove very shrewd. At least, considering Apple’s strong chances of riding out current headwinds and getting back into growth mode.
Bottom Line: As Apple Earnings Hit the Street, Sit Tight
In the years ahead, Apple could either mitigate the impact of competition on Chinese iPhone sales, or counter it through sales growth in other emerging markets (like India).
While the jury’s still out on Apple’s big bet on augmented reality/virtual reality (or AR/VR) technology, this too could in time prove to be a successful move by the company.
Investors have become less excited about Apple’s potential to capitalize on generative AI, but based on its in-progress efforts to bring artificial intelligence capability to its devices, this “show me” view about AAPL’s AI potential may soon change.
With all of this in mind, here’s the clear takeaway with AAPL stock ahead of earnings. Sit tight for now, but if shares really take a hit after earnings, feel free to pounce on the opportunity.
AAPL stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
