Apple Inc. (NASDAQ:AAPL) is due to report its earnings report on Monday. This earnings report comes after a very strong earnings reported during January, when the company broke many records. But, the analysts are not expecting record breaking earnings on Monday. The consensus expectation for EPS is around $2.16 per share and revenue is around $56.1 billion. If Apple Inc. (NASDAQ:AAPL) manages to exceed these expectations the stock might move up further from its current value of $130.28. YTD Apple Inc. (NASDAQ:AAPL) stock went up by more than 15%. Meanwhile, Option Action traders, Carter Worth, Michael Khouw and Dan Nathan talked on CNBC about Apple Inc. (NASDAQ:AAPL)’s stock trend so far and the options play to cash in on the expected rally post the earnings report.
Worth looked at Apple’s stock trend from January 2014 onwards and showed that the stock has a consistent move up by more than 65%. He pointed out that there were many strong stock rallies by more than 25% post the earnings report since January 2014. He said that the stock seems to bounce off the trend line post a strong quarter earnings report.
He pointed out three such instances since January 2014. He mentioned that post the earnings report in April 2014, the stock price went by more than 27% in 33 days. Similarly it went up by more than 26% in 28 days post its earnings report in October 2014 and more than 27% in 25 days post its earnings report in January 2015. He expects similar jump in Apple stock post its earnings report on Monday as well. Is the Apple stock heading towards new highs post its earnings report on Monday? Worth thinks so and he said that he is long Apple.
“[…] When I hear people talking about how fully valued Apple shares are here, when you consider that this stock is trading at less than 16 times next 12 months earnings, but if you strip the cash out its really more like 12 times and it is adding a lot of cash to its balance sheet each and every quarter. So, it is not as if this company is expensive relative to the market and even the growth is looking to be a little bit modest year on year. We are still looking at 9% growth. So from my perspective its really hard to figure out why you would be looking to sell shares at this point,” Khouw said.
Nathan said that Apple going to become a trillion dollar company is a universally accepted fact. He said that the Apple stock might move by around 5% post the earnings on Monday, which is around a $7 move. He said that Apple options look very cheap. Khouw pointed out that 5-7% move in stock price might not sound very big, but he said that it is worth around $40 billion in valuation for Apple. Khouw said that by spending $4.30 the traders could get June 130-145 call spread. He feels that this option will give good profits to the upside and on the downside he mentioned that the trader is just risking less than 4% of the stock price.
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