iPhone X Puts Apple in Crosshairs of Nervous Tech Investors

Updated on
  • Shares falling into earnings as analysts cut iPhone estimates
  • Main question is how much of the bad news is already baked in
Steven Pelayo, regional head of technology at HSBC Equity Research, previews Apple’s earnings.

For anxious tech investors, there’s one name that stands above all others as the two-day blitz of earnings nears its crescendo: Apple Inc.

Yes, Amazon.com Inc. and Alphabet Inc. matter, but quarterly earnings and a first-quarter revenue forecast from the world’s largest company look set to dominate the afterhours frenzy when the iPhone maker delivers results later Thursday.

The earnings arrive with the company’s stock stabilizing after a recent tailspin sent it down 6.7 percent from an all-time high set Jan. 18. Analysts have been steadily slashing estimates for the company’s flagship iPhone X. Apple rose 0.3 percent to $168 at 1:12 p.m. in New York.

Tech as a group had been leading recent weakness in U.S. equities after powering stocks to the best month since March 2016. The group trades near the highest valuation of the nine-year bull market after Republican tax cuts fueled speculation profits would continue to soar. Results late Wednesday from Facebook Inc. and Microsoft Corp. helped slow the slide.

Read more: Top IPhone suppliers warn of slower sales

Investors anticipating a disappointing report from Apple will have to determine how much of the troubles have already been priced into the shares. Analysts have cut estimates, after all, and BMO Capital Markets downgraded its rating on the stock just Wednesday. The researchers point to high prices, longer replacement cycles and weak demand in China. The company was said to cut its iPhone X production target for the March quarter by half, according to a Nikkei report.

While Apple doesn’t normally give specific iPhone unit guidance, it will likely forecast March quarter revenue, and investors will be looking for the implied iPhone trends. The average estimate on Bloomberg data for the March quarter revenue has declined from $68.1 billion a month ago to $65.9 billion Thursday, with buy-side expectations likely even lower.

Apple has been a notable underperformer versus other large cap tech stocks this year, with the shares down about 1.2 percent, while Alphabet Inc. is up 12 percent and Facebook climbing 9 percent. Apple is also straddling the key 100-day moving average at around $167 and inching closer to an relative strength index level of of 30, while almost every other member of the FAANG group mostly in overbought territory.

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Facebook shares were up as much as 3.1 percent in early trading after the company said it didn’t expect the dip in North American users seen in the last quarter to continue.

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