Apple Eyes a Trillion-Dollar Test as Earnings Approach

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.

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