With shares of Apple (NASDAQ:AAPL) trading around $449.98, is AAPL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Apple designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The company’s products and services include iPhone, iPad, Mac, iPod, Apple TV, The App Store, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. Apple has revolutionized many products and has given then an aesthetic spin over the last several years. Many consumers long for an Apple product, if they do not already have one. As an increasing number of countries are exposed to Apple’s products, demand will continue to rise and so will profits for this innovative giant.
T = Technicals on the Stock Chart are Weak
Apple stock has been a brilliant pick over the long-term. However, the stock has retraced significantly from its highs established last year. Currently, Apple stock is attempting to stabilize and possibly bounce back. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Apple is trading around its declining key averages which signal neutral to bearish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Apple options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Apple Options | 26.58% | 3% | 0% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Average | Average |
| June Options | Average | Average |
As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Apple’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Apple look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -17.97% | -0.43% | 23.03% | 19.64% |
| Revenue Growth (Y-O-Y) | 11.27% | 17.65% | 27.22% | 22.58% |
| Earnings Reaction | -0.16% | -12.35% | -0.9% | -4.31% |
Apple has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have clearly expected more from Apple’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has Apple stock done relative to its peers, Hewlett-Packard (NYSE:HPQ), Research in Motion (NASDAQ:BBRY), Microsoft (NASDAQ:MSFT), and sector?
| Apple | HP | Research in Motion | Microsoft | Sector | |
| Year-to-Date Return | -17.49% | 42.53% | 32.27% | 22.28% | 9.56% |
Apple has been a relative underperformer, year-to-date.
Conclusion
Apple has revolutionized the phone and personal computer industry by offering beautiful and simple products to an increasing user base around the world. The stock has been a big winner for long-term investors but has seen increased selling in recent times. Earnings and revenue figures have been increasing for most of the last four quarters, however, investors have grown to expect more from the company. Relative to its peers and sector, Apple stock has lagged in year-to-date performance by a significant spread. WAIT AND SEE what Apple does this coming quarter.
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