Apple Eyes a Trillion-Dollar Test as Earnings Approach

After Facebook and Amazon notched big market-cap changes, Apple is the next FAANG name in focus

Jul 30, 2018 at 7:45 AM
facebook twitter linkedin

FAANG market caps were a major point of interest for stock traders last week. Facebook (FB) on Thursday lost a record $120 billion from its market cap on a particularly brutal earnings reaction, while Friday's trading saw Amazon (AMZN) vault above the $900 billion level following its own quarterly report. With investor attention now hyper-focused on big-cap tech market caps, fellow FAANG name Apple Inc. (NASDAQ:AAPL) is set to be the last of the group to report its quarterly earnings after the market closes this Tuesday, July 31 -- and there's a fairly massive round-number market cap milestone in play ahead of the event.

Specifically, Schaeffer's Senior Quantitative Analyst Chris Prybal notes that a share price of $203.45 for AAPL would correspond to a $1 trillion market cap. That massively significant price point is a mere 3.8% above the fresh record high of $195.96 set by Apple stock last Thursday -- but the consensus opinion among analysts calls for AAPL to remain pinned just below this level, based on the equity's average 12-month price target of $203.22.

To add yet another layer of psychological chart significance into the mix, $203.07 is the level corresponding with a 20% year-to-date return for AAPL. And of course, in between AAPL's Friday close at $190.98 and the $1 trillion mark is the $200 century level itself, which is home to 12,213 open call contracts in the weekly 8/3 options series. Following its initial incursion on the $100 level back in September 2012, Apple almost immediately embarked on a steep slide that didn't reach its nadir until April 2013, at which point the peak-to-trough decline totaled 45%.

As of this writing, the options market is pricing in a post-earnings daily price swing of 4.5% for AAPL. That's right on par with the stock's median move of 4.4% in the sessions immediately following its last eight earnings reports, according to Trade-Alert, and (based on Friday's close) suggests an implied after-earnings price range of $182.38 on the downside to $199.57 on the upside. So, as with analysts, it looks as though speculators are looking for AAPL to stop just short of a trillion-dollar challenge, even in the best-case scenario.

One final observation here: Despite the breathless headlines about after-hours volatility, pre-market moves, intraday swings, and market-cap milestones, Facebook is the only FAANG stock so far this quarter to exceed its average daily post-earnings move by more than 1 percentage point in either direction (based on the past eight quarters' worth of data, by way of Trade-Alert). And looking back over that two-year stretch, AAPL's average daily move after earnings is 3.9%, whereas its biggest such move occurred in July 2016, totaling a single-day gain of 6.5%. As of Friday's closing levels, another "maximum" post-event rally of 6.5% would be sufficient to lift the stock only as high as $203.39 -- still a few pennies shy of the "trillion dollar club" -- by next Wednesday's close.

aapl 1T market cap in play

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, July 29.


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1