Expecting More Upside for Apple Heading Into Earnings

As Apple (AAPL) trades at all-time highs, investors are likely asking themselves what’s in store for third quarter earnings. The company reports FY 2021 third quarter results after the close on Tuesday, July 27.

And this mega-cap giant has not been slouching in terms of performance. Shares are up nearly 11% year to date, with most of that surge coming the past few weeks. Incredibly, since June 1, Apple shares have rocketed 18%.

I’m expecting more upside for the stock in the coming weeks and months. That’s based on Apple’s recent history of beating EPS estimates and also how the stock is trading.

Let’s first take a look at Apple’s earnings history over the past four quarters. Apple tends to beat estimates by a wide margin. You can see that in the table below:

Apple beat estimates by double digits in three out of the four prior quarters.

So, what’s the current trend of earnings estimates for this quarter? It’s following the same trend higher, with EPS estimates increasing the past two months. You can see this in the chart below:

They say the trend is your friend. Based on Apple’s prior history of beating estimates, that’s not a trend I would want to fight. So, I’m not surprised to see the estimates jumping recently.

And speaking of trends, I also take into account how a stock is trading. Oftentimes, this can clue you in on what to expect going forward. That’s why I pay attention to buy pressure in the shares.

Now, I have a proprietary way of tracking Big Money moving into a stock. But, to show you a way to visualize it, check out how Apple has been in the accumulation phase since June:

I flagged the level of approximately $125 from two months ago – that’s around the time when the current quarter’s EPS estimates were increased. Clearly, the stock is chasing earnings … which is how stocks work in the first place. To me, that’s another feather in a bullish investor’s cap.

The Bottom Line

So, let’s wrap this all up. Apple has a history of beating analyst estimates for earnings. And the current quarter’s EPS trend is ticking higher with analysts. Additionally, money appears to be pouring into the stock as it breaks out to all-time highs. Those are bullish signs that there may be more upside in the coming weeks and months.

Disclosure: The author holds no position in AAPL at the time of publication.

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