In January, I wrote about trading the options of Apple Inc. (NASDAQ:AAPL) in a post in which I recommended buying AAPL call options after Apple reported its most profitable quarter ever. In that post, I gave Apple a $127 price target by March and the stock went ahead to make a 52-Week high of $133.60 on February 24.
Apple with its market capitalization of $735.67B is probably the most covered tech stock in recent times. The company 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.
Apple is back in my sights today as the company is grabbing headlines again with the new Apple Watch that will be released on April 24. The preordering of the Apple Watch started on April 13 and the stock is already making waves. For instance, more than 1 million Apple Watches were pre-ordered on the first day the device was available on sale and an estimated 957,000 people had ordered an average of 1.3 Apple Watches.
I am excited about how the Apple Watch is poised to revolutionize the face of wearable technology much in the same way that Apple has revolutionized technology from the iPod to the iPhone. However, I am more interested in how the Apple Watch could significantly increase Apple’s revenue and keep investors attracted to the stock going forward.
It might interest you to know that the annual sales estimate for the Apple Watch ranges from 6million to 38million units this year. Hence, at the average selling price (ASP) of $504, we can project that Apple will generate $3 billion from Apple Watch sales on the low end of the spectrum and we can expect revenue to be as much as $15 billion on the high end of the spectrum.
Interesting Chart Pattern
The chart above shows how the shares of Apple have traded within the last one year. You will observe that the stock has had an impressive bullish rally from its 52-Week low of $73.05 to a 52-week high of $133.60 to mark an upside of 82.88% in 10 months. However, Apple has been trading in a tight range marked by a $124 support level and $130 resistance point in the last two months.
However, shares of Apple will eventually have to breakout above the range or breakdown below the range in the next couple of weeks. Nonetheless, Apple’s recent performance suggests that the stock has a better chance of breaking out than breaking down. Apple has a Number 2 Zacks Rank, which indicates a “Buy” conviction on the stock. The stock has a style score of “A” in Growth and a score of “A” on Momentum.
Apple has consistently beaten estimates in the last four quarters and it has consistently beaten estimates in seven out of the last eight quarters. In addition, the stock has an average surprise of 11.39% in the last four quarters. Apple is set to release its Q2 2015 results on April 27 and we can expect the stock to breakout to new highs if Apple delivers impressive quarterly results. The analyst’ consensus estimate is that Apple will deliver earnings of $2.15 per share to mark a 29.55% year-over-year increase from the earnings of $1.66 from the same quarter last year.
How to Trade APPL Options
I am optimistic about the prospects of Apple going forward and I strongly believe that Apple will report yet another strong quarter. I recommend buying AAPL call options and I am especially interested in the AAPL Jul 2015 130.000 call (AAPL150717C00130000) at an asking price of $5.20.
— Daily Option Alerts