Is a Further Breakdown for Apple in the Charts? – September 15, 2021

Apple Inc. (AAPL) designs a wide variety of consumer electronic devices, including smartphones, tablets, PCs, smartwatches, AirPods, and TV boxes, with the iPhone making up the majority of its total revenue. In addition, the company offers its customers a variety of services including Apple Music, iCloud, Apple TV+, Apple Pay, among others.

The company is benefiting from strong momentum in its Services segment, driven by the App Store, Cloud Services, Music, and AppleCare. AAPL’s future looks bright due new iPhones that support 5G and a revamped iPad and Mac line-up.

AAPL had a whopping $62 billion in cash as of the end of the most recent quarter. This compares favorably with $16 billion in short-term debt. The company is also highly profitable with a net margin of 25%. These factors have contributed to the firm’s Quality Grade of B in our POWR Ratings system.

From a growth standpoint, earnings per share have risen an average of 22.8% per year over the past three years and analysts expect earnings to surge 68.5% year over year in the current quarter.

AAPL’s stock appears relatively overvalued with a forward P/E of 26.88. The stock had been showing bullish momentum from June to the first week this month, but the stock has reversed course since as shown in the chart below.

Take a look at the 1-year chart of AAPL below with my added notations:

While trending higher and higher, AAPL has also formed a clear trend line of support (green) along the way. Any (2) points can start a trend line, but it’s the 3rd test and beyond that confirms its relevance.

AAPL tested its trendline again yesterday.  If the trendline support level is broken, a short position could be entered with a protective stop placed above the entry point.

AAPL shares rose $0.30 (+0.20%) in premarket trading Wednesday. Year-to-date, AAPL has gained 12.41%, versus a 19.74% rise in the benchmark S&P 500 index during the same period.

Author: Christian Tharp