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Asset Watch
Thursday, January 30, 2025
Panic struck the stock market on Jan. 27, as potential AI disruption sunk heavyweights like NVIDIA, AMD, and Micron. And with concerns over AI investment, costs, and eventual returns creating a crisis of confidence, analyst downgrades have become more common lately.
But, with Apple showcasing relative strength, and a bevy of bad news galvanising the bears, could the iPhone maker outperform post-earnings?
While Apple was touted for its AI innovations and the potential for an iPhone upgrade super cycle, the hype has worn off and analysts expect weak earnings results on Jan. 30.
Jefferies downgraded Apple to underperform and cut its price target to $212, telling clients, “We lower forecasts driven by weak iPhone sales and the general [consumer electronics] market and our reduced outlook for iPhone 17/18 due to slower AI uptake and commercialization…. [Guidance] could also disappoint.”
Likewise, Loop Capital set a $230 price target and opined, “We’re downgrading to hold on the heels of work from Loop Capital Supply Chain Analyst John Donovan that suggest a material iPhone demand reduction beginning in the March quarter but materially amplifying in the June and September” periods.
Thus, while expectations have deteriorated, it could provide room for Apple to deliver a positive surprise amid the depressed sentiment.
While Apple has suffered several bumps and bruises in January, the technical outlook remains highly constructive. For example, the monthly chart shows how Apple has support in the $220 area, and the stock bounced after hitting a monthly low of $219.
As a result, unless the Jan. 30 earnings print is horrible, the recent correction may have front-run the bad news.
Another key indicator is the 10-month moving average. If you analyse the movement of the blue line, you can see that the metric has been a solid support anchor during the long-term bull market. Even after the breakdown during the 2022 bear market, the indicator acted as resistance seven times until a breakout occurred in March 2023.
Consequently, with the 10-month MA aligned with $220 price support, the combination may be strong enough to end a potential pullback in the days ahead.
Because trading requires calculated bets based on probabilities, it’s vital to practice diligent risk management and utilise stop-loss orders. Placing an exit order in the $217 to $219 range could be wise in case Apple retests the January lows, or moves slightly below, before rallying.
Conversely, if the Jan. 30 earnings release is better than expected, Apple may hit a new record high in short order.
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