Summary:

  • Apple (AAPL) rose as high as 5% on Wednesday morning, after reporting earnings that beat Wall Street expectations, which it had guided lower earlier this month.
  • However putting today’s move into context with the stock’s market cycles and recent price action, we believe after this modest bounce, it will head lower again.

Apple reported earnings per share of $4.18 and total revenue of $84.3 billion, above analyst estimates of $4.17 and $84 billion. Management forecast second quarter revenue of $55-59 billion, which was just in line with Wall Street’s average estimate of $59 billion.

All together the results were taken as positive, given its previously lowered guidance for the holiday quarter. CEO Tim Cook further explained that, “We manage Apple for the long term, and our results demonstrate that the underlying strength of our business runs deep and wide.”

Despite Cook’s positive comments, declining iPhone sales and lower margins hold significance. And margins are likely to get worse, as the company prepares for to cut prices.

Analyzing Apple’s market cycles, we believe it is in the rising phase of its current cycle, and approaching resistance. Our analysis is that its recent rebound has been substandard, which indicates weakness. Our forecast is for lower prices into the Spring, with a target of $140.

For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.