Apple reported disappointing earnings this week and the shares of the tech company went down by 6% in the following trading sessions. Is it the time to buy the stocks on weakness or is there further downside to come? This is the question we will try to answer in this article.
Sooner this week, Apple reported weak earnings compared to most analysts’ estimates. The stock that was already down more than 25% from its highs of mid 2015 suffered another leg lower this week. Most traders have been selling the stock in 2015 due to the lack of growth catalysts for the company. Some analysts don’t hesitate to accuse Apple of losing its disruptive culture and believe that it would take time before the company releases a blockbuster product comparable to the iPhone. While Apple is currently working in the development of new products such as ApplePay or AppleTV, most investors believe these services are nothing more than already existing businesses that Apple tries to execute more efficiently than its competitors.
Details of the Apple 1Q earnings – Time to Buy Apple shares ?
For the first fiscal quarter of 2016, Apple reported an EPS (Earning per share) of 3.28 dollars, which is better than the 3.22 EPS forecasted by Wall Street analysts. Investors were nevertheless more worried about the disappointing Iphone sales numbers. The company sold 74.78 million Iphones versus 75 million expected. This is the third consecutive quarter that Apple misses its expectations on Iphone Sales, raising fears that the star product is losing momentum. Apple also revised down its revenue forecasts for the second quarter, further weakening the invertor sentiment on the firm.
This confirmation of “bad news” may help the stock to finally find a floor, given that it’s already down -25% from the top in April 2015. While expectations were very low, the company didn’t manage to beat them but no Wall Street analyst downgraded the stock. As consensus is turning more neutral, it could be the right time to build some position on the equity stock that could outperform the overvalued sector in a possible bear market.
What are Wall Street Analysts thinking about the release?
Citi believes iPhones will once again experience and return to growth with the new iPhone 7 later this year while Deutsche Bank is concerned about lack of growth in iPhone units and the slowdown in China sales. On their side, JP Morgan and Morgan Stanley, the famous US investment banks, are more and more confident that Apple can successfully grow its revenues in the new service businesses we talked about earlier.
How to trade Apple stocks with binary options?
While stock trading can be very rewarding with Apple, we believe that the current market environment (high volatility and possible bear market) makes it extremely difficult to buy shares for the medium-term. We would be more willing to Buy short-term binary options after the post-earning weakness and the likelihood of a technical rebound. In the absence of clear growth catalysts, we would be happy to short the company if its goes back above 100 dollars.
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