Here’s Where to Buy Apple After Post-Earnings Selloff
Apple ($AAPL) fell sharply in after hours trading on Thursday after the company reported second quarter earnings. The company earned $2.02 per share, versus analysts’ estimates of $1.89.
However, revenues were only slightly above estimates, and the company’s forward guidance was disappointing.
Additionally, Apple downgraded its Q4 revenue growth from 12% to a range between 9% and 11%. The company expects to be affected by higher component prices, as well as supply constraints. According to Apple, those supply issues have spilled over into the current quarter.
Apple Success Before Selloff
To understand why Apple experienced a sharp selloff, take a look at the stock’s performance leading up to earnings.
On June 26, Apple closed at $275 (point A). That day, we explained why the selling was overdone.
The stock would roar higher by 23% over the next month to an all-time high (point B). For a stock this size (Apple sported a $4.9 trillion market cap as of Thursday’s close) to gain 23% in a month is impressive.
Ironically, while Apple shares were climbing, many of the companies that have been more aggressive in the AI field, like Meta Platforms ($META) and Alphabet ($GOOG), saw sharp declines in their shares. Just a month ago, Apple was being chastised for falling behind in the AI race.
One Apple Issue Already Improving
Another reason Apple is experiencing turbulence is due to currency exchange rates. Those rates had a 2.5% negative impact on quarter-over-quarter revenue. This is because a stronger dollar pushes foreign currencies lower, reducing profits from overseas sales.
The dollar gained significant ground during the first half of this year, as the U.S. dollar index climbed from 96 in January (point A) to 101.5 in June (point B). This index tracks the greenback versus a basket of currencies, including the euro, Japanese yen, British pound and others.
The good news for Apple and other exporters is that the dollar index has tumbled hard over the past two sessions, back down to the 100 area (point C). In addition, the index has formed a bearish double-top pattern (shaded yellow), suggesting a further decline is on the way.
Bottom Line
Prior to Thursday’s earnings report, we raised our target price for Apple to $360. While we recognize the challenges Apple is facing, we are maintaining that target price.
This selloff could last a few days, and may even take Apple below $300. If it does, I’d consider it a buying opportunity.
At the time of publication, Ponsi was long AAPL.
