Buy Or Sell Apple Stock Ahead Of Q3 Earnings?
We will also monitor the effects of tariffs on Apple, in light of the intense trade conflict between the United States and key trading allies, particularly China. In the previous quarter, CEO Tim Cook cautioned that Apple could face up to $900 million in additional expenses during the June quarter due to tariffs. Although there have been indications of diminishing tensions between the U.S. and China, President Trump mentioned in May that Apple might be subject to a 25% import tariff on iPhones sold in the U.S. unless the products are manufactured within the country.
The company has a current market capitalization of $3.1 trillion. Revenue over the past twelve months totaled $400 billion, with the company maintaining operational profitability that included $127 billion in operating profits and a net income of $97 billion. Although much depends on how the results align with consensus and expectations, gaining an understanding of historical patterns could potentially improve the odds in favor of event-driven traders.
There are two approaches to take: comprehend the historical probabilities and position yourself ahead of the earnings announcement, or evaluate the relationship between immediate and medium-term returns following earnings and position yourself accordingly after the earnings are disclosed. That said, if you are looking for upside with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative – having surpassed the S&P 500 and achieved returns of over 91% since its inception.
See earnings reaction history of all stocks
Apple's Historical Odds Of Positive Post-Earnings Return
Here are some insights regarding one-day (1D) post-earnings returns:
Additional information regarding the observed 5-Day (5D) and 21-Day (21D) returns post earnings is summarized along with the statistics in the table below.
5-Day (5D) and 21-Day (21D) returns post earnings
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though ineffective if the correlation is low) involves understanding the relationship between short-term and medium-term returns following earnings, identifying a pair with the highest correlation, and executing the corresponding trade. For instance, if 1D and 5D show the strongest correlation, a trader can position themselves 'long' for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data based on the 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the ensuing 5D returns.
Correlation Between 1D, 5D, and 21D Historical Returns
Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (a combination of all three, the S&P 500, S&P mid-cap, and Russell 2000), generating substantial returns for investors. In addition, if you desire upside with a smoother experience than an individual stock like Apple, consider the High Quality portfolio, which has excelled beyond the S&P and achieved returns exceeding 91% since its inception.
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Joby Aviation Stock Soars to an All-Time High: My Prediction for What Comes Next was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
