Apple Shares Drop On Weaker Q3 Guidance

Shares  of Apple are trading 1.8% lower in aftermarket trade after a mixed report which beat earnings targets, but fell short on earnings and sales guidance.

The company announced an adjusted EPS of $2.10 versus expectations of $2.02 per share.

However, the revenue number of $52.9 billion was less than the street’s expectation of $53.02. Further, revenue guidance for Q3 has been revised down from $45.6 billion to $43.5 billion.

In addition, gross margins for Q3 are also pointing lower to 37.5% from 38.5%.

Taking into account the 20% rally the stock has seen in calendar 2017 from $118.00 to $147.00, a pullback into the $138.00 handle is a reasonable target.

Apple Q1 Results

Shares of Apple are up 3% to $125.00 as Q1 earnings and revenue beat expectations. The firm also announce that they sold a record 78.4 million iPhones over the three month period.

Earnings were announced at $3.36 per share on revenue of $78.4 billion. The street was expecting earnings of $3.22 per share and revenue of $77.3 billion.

To put these sales and earnings numbers into perspective: Q1 2017  iPhone sales generated 69% of the company’s total revenue. This compares to 2.5% in Q1 2008.

One of the few negative aspects of the report was the forward guidance. The firm announced a modest cut to Q2 revenue to $51.5 billion from $53.8 billion expected.

As the market absorbs this report and lower forward guidance, we see price support back on the old resistance near $118. A break below $118 will validate our recent Algo Engine short signal. With price trading above our breakout range, we’re on the sideline for the time being with this trade.

Chart – Apple