Apple Inc. (AAPL) shares suffered their worst trading week since 2013 after reporting dismal second quarter results, a handful of analysts’ price target cuts, and billionaire activist Carl Icahn stated he sold his entire stake of 45 million shares.
On Tuesday, Apple disappointed after posting quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. Analysts’ were expecting revenue of $52.2 billion, much lower than the $58 billion printed last year, and net income of $1.97 per diluted share was eyed, much lower than the $2.33 per diluted share, in the year-ago quarter. The key metric was the dramatic fall with iPhone shipments to 51.2 million, much lower than last year’s 61.2 million figure. The company also announced an increase of $50 billion to the Company’s program to return capital to shareholders. Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018.
The outlook for the third quarter also missed with revenue targeted at $41-43 billion, lower than the $45.5 billion analysts’ forecast. Thursday, Carl Icahn voiced concerns over the potential hurdles selling Apple products could see in China in the coming years.
Price action on the Apple Inc. daily chart highlights the recent drop is now approaching major support from the psychological $92 handle. The bearish slide could accelerate if we see price have a daily close below the $90 level, deeper support could come from the $86.97 level which is the 127.2 Fibonacci expansion level of the January to April rally. Critical support will come from the $80 handle. If price stabilizes and the bullish stance returns, price could target the $100 area.
The Trade: Apple at $87.50, with a stop loss at $85.50 and a take profit at $93.50. The Risk/Reward Ratio is 1:3