Apple no contest vs FBI boosts shares more than new iPhone

It won’t have escaped the notice of any Apple investor that the stock has recently come off the ropes.

iPhone holding pattern

This started to happen well before Apple’s plan to plant a flag on lower price points came to fruition last week.

In fact, the widely-held assessment that Cupertino California’s most famous resident remains in something of a ‘holding pattern’ ahead of the release of a new flagship iPhone in September, still makes a great deal of sense after its announcement of cheaper watches, phones and iPads.

Whilst a more affordable iPhone SE ($250 cheaper than an iPhone 6s) is expected to tempt sections of the market that typically veers to mid-priced, largely Android handsets, the unusually compact 4-inch iPhone is barely expected to lift Apple smartphone revenues.

Smaller and lower

With iOS market share reportedly running steady at 34% vs. 52% for Android in 2015, and iPhone SE unit sales—including the newest—forecast to rise by 12 million in 2017, the latest model would add $4.8bn to total revenues, or just 2.05% of Apple’s 2015 sales, whilst lifting market share fractionally.

In the meantime, Apple is still forecast to report a first-ever year-on-year decline in quarterly handset sales when it releases Q2 results on 25th April, having said iPhone sales flattened in the December quarter.

Therefore, AAPL’s rise of 20% off January lows after a horrendous 2015—it ended the year lower for the first time since 2008—suggests re-rated expectations are not being driven by hopes of an immediate rebound in iPhone sales.

Technical ‘win’

Rather, Apple’s spirited stand and eventual ‘technical victory’ over the FBI (a ‘no-contest’ to use a boxing metaphor) has at the very least done Apple’s ambient public image and, perhaps shares, no harm.

Only the misguided would venture to argue that Apple’s corporate passion about the protection of customers’ privacy was long-standing, deep-rooted and/or categorical.

But as connected mobile devices embed themselves ever deeper into the personal digital lives of individuals, Apple’s tacit reassurances that it is not casual about personal data have struck a chord.

So long as Apple’s Q2 sales meet downgraded expectations (for an 11% fall Y/Y to $51.69bn) the path for the stock’s continued steady recovery is likely to remain open.

Blue skies?

From a technical perspective, in January, we pointed out the significance and importance of Apple stock’s 200-week moving average, a threshold it had not crossed for about 7 years.

WEEKLY CHART

Please click image to enlarge

At the time, AAPL was trading dangerously close to the line, the symbolic import of which could have quickly translated to actual deeper losses, if it were breached.

Having risen out of danger since then, Apple shares were within reach of their equally important 200-day moving average (DMA) at the time of writing, which recently bisected 61.8% of the stock’s Nov-Jan fall by extension; a significant barrier.

DAILY CHART

Please click image to enlarge

A recent successful passage past a similarly weighty 38.2% interval, and 50 and 100-DMAs were further confirmation that AAPL’s current uptrend has good legs.

The stochastic momentum profile (sub-charts in both images above) is also supportive.

A sustained conquering of current overhead hurdles would leave the shares with almost clear blue skies until theoretical completion of the current extension at $124.

Failure would bring risk of a near-term fall back to at least a consolidation zone currently crossed by the 100-DMA (lilac line) around $107-$104.

Should even that area give way, a large gap below might well take AAPL back below $100 again.

The psychological market impact on sentiment seen when the price traded below that marker last time, would probably recur.