With shares of Apple (NASDAQ:AAPL) trading around $456, is AAPL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for a Stock’s Movement

Apple designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The products sold by Apple have seen strong demand worldwide for a multitude of reasons: ease of use, aesthetics, and capabilities of the software to name a few. As an increasing number of countries continue to develop, look for Apple to expand and make a significant presence outside of the United States.

T = Technicals on the Stock Chart are Weak

Most investors are aware of the returns that Apple has generated over the years. The stock made all-time highs last year near $700 per share but has recently tumbled down about 35 percent. The long term uptrend is still in tact, however, the recent pullback may be reasons for concern. Currently, price action is pointing towards consolidation in the near-term.

Evaluating a price trend can be efficiently done with the use of key moving averages. Key simple moving averages can provide insight into the trend and strength of the trend. What are the key moving averages? –the 50-day, 100-day, and 200-day simple moving averages. Apple stock is currently trading below all of its declining key simple moving averages. What practical information can be extracted from this? The moving averages are confirming a near-term downtrend in Apple stock.

One way to gain perspective into investor sentiment is through the use of the options market. More specifically, taking a look at the implied volatility and implied volatility skew levels of Apple options may help determine if investors are bullish, neutral, or bearish. The implied volatility of Apple options is at 28.64 percent today which coincides with a 26th percentile over the last 30 trading days and 20th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

The implied volatility skew of April and May put and call options is at about average. So as of today, there is an average demand from call and put buyers or average supply of call and put sellers, all neutral over the next two months. Investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

E = Earnings Are Increasing Quarter-Over-Quarter

Earnings and revenue growth expectations are built into most equity valuation models. Generally, a rise in earnings and revenue growth rates is strongly correlated with a rise in the stock price. What do the last four quarterly earnings and revenue growth figures for Apple look like? The last four quarterly earnings growth (Y-O-Y) rates have been: -0.43, 22.66, 19.64, and 92.19 percent while the last four revenue growth (Y-O-Y) rates have all been: 17.65, 27.22, 22.58, and 58.86 percent. Apple’s earnings and revenue growth rates have, for the most part, been strong.

More importantly, how did the markets like these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on Apple’s stock. The last four quarters have seen next trading session returns of -12.35, -0.9, -4.31, and 8.87 percent. Clearly, the markets have been expecting stronger growth rates from Apple.

E = Poor Relative Performance Versus Peers and Sector

Sure Apple products are a hot item but how has the stock done relative to its peers and sector? Year-to-date, the stock is returning -17.1 percent while its competitors, Hewlett-Packard (NYSE:HPQ), Google (NASDAQ:GOOG), Research in Motion (NASDAQ:BBRY), and the sector are returning 52.26, 11.97, 30.18, and 1.71 percent respectively. Apple stock has not been as hot as its products year-to-date.


Apple is an established brand that sees very strong  worldwide demand for its products. Can the stock recover from its recent slump? Apple stock has been a huge winner over the years but has recently seen a strong decline. Earnings and revenue growth rates have been decent but investors have had higher expectations priced-in. Relative to its peers and sector, the stock has been a  weak performer year-to-date. WAIT AND SEE what Apple delivers in this coming quarter.

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