Apple reports earnings this coming Monday, October 28, and there are five reasons to believe that the report will beat expectations and boost Apple shares.
1) A study out of Citigroup’s Quantitative Research Group showed that one of the best predictors of an “earnings beat” is a stock’s one-month performance going into the earnings report. Apple is up more than 10% over the past month, versus a 3.5% move in the S&P 500.
2) Technically, Apple has just broken out of a bullish flag pattern, and it’s just broken the neckline of a bullish inverse head and shoulders pattern, which projects a near term price target for Apple of $570. The stock has traded higher 11 out of the past 12 trading days. This tells me that smart money is placing bets on a good earnings report on Monday.
3) Analysts have raised their target price over the past week on Apple. Ed Parker, with Lazard Capital, raised his price target to $570 and reiterated a buy rating on Apple. Cantor Fitzgerald’s Brian White upped his Apple price target to $577 and believes the stock could surprise on the upside. Goldman Sachs' Bill Shope reiterated a buy rating on the stock and a $560 price target last week. These analyst moves tend to be good precursors for a stock set to beat earnings expectations.
4) Apple now has a billionaire activist, Carl Icahn, who is hell-bent on forcing the company to deploy its cash to buy a huge chunk of stock back. Don’t be surprised if Apple on Monday announces another huge stock buyback or increase in its dividend payout.
5) Finally, Apple has not just price momentum, but product momentum. After Apple’s media day this week, people were excited for the first time in over a year. Apple is getting its buzz back. Don’t be surprised if Apple forecasts better 2014 sales and earnings on Monday.
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