Apple Inc. (NASDAQ:AAPL) has never shied away from the spotlight, but some of the more recent headlines circulating the company haven’t exactly been positive. As a result, the shares are now sitting at a three-month low.
The first issue surrounds concerns from investors and analysts alike that AAPL will report weaker-than-expected sales of its latest iPhone iteration in its upcoming earnings report on Thursday afternoon. These assumptions are based off figures from the company’s suppliers, which are often viewed as canaries in the coal mine.
Then, earlier this week the Department of Justice and the SEC announced that they will be looking into the disclosure AAPL made regarding battery issues in some of its products. It’s true that this may simply be the government doing its due diligence, but it’s not often you find Apple in the crosshairs of a federal investigation.
Of course, nothing may come of the investigation, but it does signal a potential change in how investors view this once untouchable company.
It All Boils Down to Earnings
There is a lot of bad news baked into the shares at current prices, but it could all be shaken off quickly if AAPL is able to pull off a strong earnings report.
Analysts are looking for earnings of $3.83 a share, up from $3.36 a share last year, on 11% revenue growth to just over $87 billion.
However, all eyes will really be on the iPhone X sales figures. And because there’s a good chance that the average sale price will increase thanks to a better mix of products, there’s also a good chance that the lower sales numbers will be offset.
Tax reform is working in the company’s favor as well. A lower tax rate combined with increased buybacks and a boosted dividend could lead to the stock moving higher after the report.
As long Apple’s fourth-quarter earnings report doesn’t come in much worse than expected, I do not believe the stock is in danger of a long-term slide.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.