Earnings Report

On July 15^th, the I Know First research team posted a bullish long-term evaluation of Apple stock whilst analysing their Chinese market, Apple Watch, Apple TV and operating profits.

Since then, Apple Inc. have released their latest quarterly results which reported revenue growth of 33% reaching $49.6bn and profits of $10.7bn.

The technology giant sold 47.5 million iPhones in the quarter to 27 June, up 35% on a year ago, with Mac computer sales also up 9% to 4.8 million helping Apple achieve another highly successful quarter.

“We had an amazing quarter, with iPhone revenue up 59 percent over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch,” said Tim Cook, Apple’s CEO. “The excitement for Apple Music has been incredible, and we’re looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall.”

“In the third quarter our year-over-year growth rate accelerated from the first half of fiscal 2015, with revenue up 33 percent and earnings per share up 45 percent,” said Luca Maestri, Apple’s CFO. “We generated very strong operating cash flow of $15 billion, and we returned over $13 billion to shareholders through our capital return program.”

Growth Concerns

Despite this, AAPL shares fell by 6.7% ($8.85) to $121.89 in after-hours trading and have not recovered since after revenue forecasts for the fourth quarter were slightly lower than expected and Apple’s profits being centred too much around iPhone sales. These concerns are legitimate. IPhone sales account for approximately 70% of Apple’s revenue and people were perhaps hoping to see some diversification amongst Apple products and the fact that Apple have refused to release data for Apple Watch sales did not help to alleviate these concerns.

Likewise, investors and Apple loyalists would want to know how, and to what extent, can Apple progress and expand. We have a company with a market cap of $750 billion, it is the most valuable company on the planet which regularly accrues phenomenal earning and sits on nearly $200 billion of cash. How can it grow further? Will any products come close to their successful iPhones? Seemingly a lot of analysts believe that Apple TV and Apple Watch will not make the company any more valuable then it is now and that Apple’s massive success is simply impossible to extend further.

That being said, Apple are forecasting revenue between $49bn and $51bn in their fiscal 2015 fourth quarter, sales in China are bound to expand further and Apple Watch is set to make a tidy profit. Apple have never failed their shareholders and will not disappoint them anytime soon.

Quite remarkably, I Know First’s algorithm correctly predicted this bearish small-term stock movement. The below forecast was attributed to AAPL stock before the on July 21st before Apple’s quarterly results were released.

(I Know First Forecast – July 21st)

The forecast gave AAPL a negative signal of -2.22 for the three day forecast and as time progresses Apple’s bearish signal becomes weaker receiving a mild signal of -0.67 in the 14-day forecast.

Apple Stock Forecast

Looking to the future, and, bearing in mind the algorithm accurately predicted the short-term fall in AAPL share value, the algorithm is moderately bullish on AAPL stock.

(I Know First Forecast – July 28th) 

The above forecast is one of our most-recent forecast from July 28^th 2015 and is for the long-term periods of one month, three months and one year. The forecasts are moderately bullish with the three-month forecast having a signal strength of 16.88 and a predictability of 0.26. Likewise, the one-year forecast has a positive signal of 10.93 with a predictability indicator of 0.27. The algorithm thus correlates with the fundamental analysis which indicates that Apple’s next four quarters will be lucrative for AAPL share holders. The fact that they are rolling at least three new products in the upcoming new months was enough to convince analysts to upgrade their reconsiderations.

Conclusion

Concerns regarding the Chinese markets, sales too focused on the iPhone and whether or not the company can grow further are not unfounded and are legitimate. However, their operating profits for smartphones have ridiculed their closest rivals despite selling 30% less devices, Apple Watch sales have been hitting off and have the potential to innovate the wearable tech industry and effectively create a new industry and Apple TV appears ready to be finally launched this Fall. Without a doubt, Apple’s has an optimistic future with little scope for any downside movement on their stock value. With both the algorithmic and fundamental analysis indicating Apple to have a favourable future, I cannot imagine AAPL experiencing any long-term bearish movement.