Will Tech heavyweights shoot the lights out?
With earnings set to take place after normal market trading hours, we're one of the few brokers who facilitate trade in the after-market, specifically on our MT5 platform. There's a useful video at the bottom of this article on how to trade shares with us using MT5. Additionally, for those excited about Tesla, my colleague Chris Weston wrote a fantastic piece here
Apple needs little introduction as a company, with its brand globally recognized and holding the title of the largest company in the world on the basis of market capitalization. The share price has been under pressure from the start of this year as longer-term yields have risen, lowering the value of its interest sensitive cash flows. Additionally, the tailwind from the pandemic which encouraged work, learn and play from home is now receding as societies try to get back to normality. However, Joe Biden’s stimulus checks could be used to purchase Apple products as well as the large consumer savings which could be released as the pent-up demand explodes back into the economy. On Wednesday, Apple gave us an update on its latest product creations. These included a new iPad Pro kitted out with an M1 processor and 5G connectivity amongst other features, AirTags – a small circular tracking device, revamped iMac and a new purple colour for its line of iPhone 12 & 12 mini, etc. The market’s reaction was one of slight disappointment as shares slid 1.28% lower. Apple has big projects in its pipeline such as an ambition to enter the healthcare industry as well as autonomous driving, which are exciting growth areas for the company. The CFO recently reiterated Apple’s commitment of reaching a net cash neutral position over time, which means more returns of capital to shareholders. Apple is well positioned to take advantage of a significant upgrade cycle due to one of the biggest new tech trends – 5G. Besides rising rates, there is a risk of Apple having to cut its App Store commission fees for developers. Hopefully Apple will provide guidance on its outlook for future quarters as investors have been left in the dark due to the uncertainty of the pandemic in previous quarters. Apple has a strong history of beating estimates, currently 8 out of the previous 8 quarters. In terms of the kind of price move we can expect, the average move is 4.1%. As it stands results will be released at 06:00 AEST/21:00 UK Time April 28, just after the US market closes.
Apple’s share price has moved slightly upwards/sideways in a ascending channel since September 2020. It looks like Apple could be building it's next leg higher, with a small pullback into the $125 - $130 zone. This area is sticky given the confluence of horizontal support and resistance as well as the 21-day EMA and 50-day SMA. The RSI is also pushing higher and has overcome the 56 resistance, which marked peaks in prior price rallies, there's also plenty room before it can be classified as overbought. A strong Q2 earnings release would help push price higher towards $140. The shorter-term 21-day EMA is also above the 50-day SMA, a signal of bullish intent. Could price get back up to January high levels of $145 or are we set for a move lower towards $120 or worse, below the lower line of the ascending channel - $115?
Amazon another company which I’m sure many of us became intimately familiar with during lockdown as retail shops remained shut. As a result, Amazon produced superb results over last year. The question that some are asking now is, with more people wanting to spend at outdoor shops after being held up in their houses - could this see a slowdown in sales for Amazon. Potentially over the next few quarters yes, but I think e-commerce is definitely here to stay given its convenience for certain products. Biden’s stimulus checks should see some decent spending flowing Amazon’s way. Additionally, there are many regions globally that have low online shopping penetration rates providing green shoots for Amazon’s growth profile going forward. We also saw a change of the guard as Jeff Bezos hands over the reigns to Andy Jassy (former head of Amazon cloud business) and assumes the role of executive chairman by Q3. This could be an indication of more focus being placed on Amazon’s very dominant and high growth cloud business. In an attempt to have more of a physical presence, Amazon has been gradually opening up its own grocery stores (Amazon Fresh) in addition to the Whole Foods chains. Additionally, Amazon have also just made a push into the beauty sector by launching their first high-tech hair salon. A risk to Amazon’s share price is its high growth cash flows being hit by increasing yields as well as looming regulatory risk given their size. In terms of prior beats, Amazon has achieved beats on 6 out of its previous 8 quarters, seeing price bob up and down by an average 3.9%. Results will be released on April 29 at 06:00 AEST/21:00 UK time.
Price action has been sideways/slightly downwards since the 2020 September highs of $3550. Earnings results will have to be strong if price is to break above the downtrend line around $3400. Above that, price would need to take out February’s high around $3430 to make a push towards $3500. The RSI is right up against the 62 resistance which has marked previous peaks in price rallies, so the bulls need to monitor what happens here. The 50-day SMA is just below the 200-day SMA, which means it has made the dreaded death cross – which usually points to price declines. However, given it is such a trivial difference, it may be hasty to draw too much from it. Price should find some support from the shorter term 21-day EMA, as well as the 50-day and 200-day SMA around $3180 area if it makes a move lower to the middle of the channel.
The social media giant Facebook is trying to look at which levers they can pull to keep their growth profile over the longer term robust and not be so overly reliant on ad revenue. Vox, recently reported that Facebook has plans to enter the audio space, creating a product to compete with companies like Clubhouse. However, this may be put on the backburner given, the reopening of the economy and looking at Clubhouse’s latest download numbers. A videoconferencing platform is also on the cards, but again one has to ask is there room for Facebook as we return to more normality and face to face interactions? Facebook also has to try and juggle the multiple headwinds of privacy concerns (new changes in IOS and Android for targeted ads), antirust scrutiny and getting a handle on the rapid spread of fake news. Facebook, has come out of the pandemic relatively unscathed as the doomsday scenario slowdown in advertising spend never came to fruition. They generate almost their entire revenue from this segment so that creates significant concentration risk. Facebook has a number of tools to use in order to diversify its revenues – 1) Larger shift into e-commerce activity taking place on its platform (fee revenue) 2) Leveraging the Tik Tok craze through its own software “Reels” 3) Launch its own cryptocurrency at some stage, which would help stimulate more awareness and growth in Facebook Pay 4) Virtual Reality headset – Oculus 5) Monetizing Whatsapp more aggressively, especially in India with its over 400 mln users a month. Facebook has beaten consensus estimates over the last 8 quarters whilst making an average price move of 4.8%. Results will be released on April 28 at 06:00 AEST/21:00 UK time.
Facebook really is at a key crossroads, sitting right on its 21-day EMA with price candles making long wicks to the bottom, indicating buyers are prepared to step in and send price higher. The $300 level is also a key support level. Additionally, the RSI is right on its 54.69 horizontal support line. Taking all of this into account, the question remains - will Facebook revisit channel highs at $315 or slide lower towards the middle of the channel around the 50-day SMA and $280 zone?