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Apple Q4 Preview

Apple (NASDAQ:AAPL) released the iPhone 6 and iPhone 6 Plus in September of last year. The phone had incredible sales since its release, causing the stock price to soar. From September 9th of last year, when the event took place, until July 20th, the stock price soared almost 35%. Since that time though, the stock price has crashed back to earth, falling 15% in little over a month.

Price Change

With Apple confirming that its next big event will take place on September 9th once again, now is a good time to take a look at the iPhone maker. During the upcoming event, new products can be expected, such as a revamped iPhone. But Apple might also surprise customers and investors alike with an unexpected product. With Tim Cook acting as company CEO for four years now, it is possible to accurately judge the job he has done, and Apple might be a good investment choice sometime in the near future.

New iPhone To Include Improvements To iPhone 6

The biggest event during the upcoming quarter is clearly the event on September 9th, when Apple is expected to reveal a new, revamped iPhone. There will actually be two versions, just as there were last year, with the newest versions being the iPhone 6s and 6s Plus. These phones will not be fundamentally different than the previous phones, which brought larger screen sizes to iPhone users.

But the new phones will have some discernible upgrades that will improve the overall performance. The most notable upgrade will be the additional features of Force Touch and haptic feedback. This allows for user to press harder on the screen, which will cause the phone to react with haptic feedback, which feels like a tap. This will add all new options to the user interface, making use of the phone more intuitive and easier.

iPhone 6s

Some other additional features will be a new A9 processor, which is supposed to be significantly faster than the A8 processor in the iPhone 6. The front and rear cameras will be upgraded to, solving one of the main complaints about the iPhone 6, and the phone itself will have a brighter display as the company is working with a brighter OLED screen.

Besides these expected upgrades, there are also rumors that the iPhone will come in two new colors starting this fall. Reaction to this updated iPhone be a key takeaway from the upcoming event, but it is not the only thing to look out for during the event. Another update to one of the company’s products could end up having a much larger role in the stock price moving forward.

New Apple TV Will Finally Be Released

A new Apple TV has been expected for a while now. Analysts had believed the device would be included in the World Wide Developers Conference in May, but that was not the case. That shifted expectations to the upcoming event, as the company is set to take the product from being just a hobby to a key part of its product ecosystem.

But a key part of the new device will still be left out. This is the slimmed down cable streaming service, which Apple is still not yet ready to release. Negotiations with cable providers are still ongoing, but Apple is moving ahead with releasing an upgraded set top box anyways.

While the overhauled version of the Apple TV will not include a cable-streaming package, it will have plenty of new features. One of the biggest will be the redone remote, which will include motion controls much like that of the Wii Remote. This feature could open the way for the Apple TV to become the go to gaming device for casual use. This is even more likely since Apple will open the App Store on the device, allowing third-party app makers to release their own games.

Apple TV

In order to support this kind of gaming function, Apple is including the A8 processor, which is also in the iPhone 6. However, this processor will be more powerful in the Apple TV because it will use electricity instead of having to rely on battery power.

Other changes to the remote will also be included. One potential new feature on the device will be the inclusion of Siri, which users will be able to access through a voice-controlled option on the remote. Using the voice-control on the remote, users will be able to tell Siri to turn on a certain show to watch or start a certain game. This feature also has plenty of future promise related to the Apple Home features, such as turning up the air conditioning or turning off the lights connected to the Apple TV.

While the television streaming service will not be included, releasing this Apple TV could give the company leverage in future negotiations with the cable providers. The new Apple TV is expected to cost either $150 or $200, and the successful integration of this product into families’ living rooms would provide a huge boost to the company’s future prospects.

Tim Cook’s Track Record In The Face Of China Concerns

Tim Cook has now been Apple’s CEO for four years, having taken over from the legendary Steve Jobs. During the early part of his tenure, some investors were unsure whether he was right for the job, as the stock fell precipitously in 2012 and 2013. That looks rather silly now, and any potential investors concerned over whether Cook can carry on Jobs’ legacy should be placated by now.

Since Cook took over the role, the stock price is up over 90%. This is particularly impressive considering the stock pullback during the end of 2012 and beginning of 2013 and the current concerns over China. This market has proven to be a sore spot for Apple as investors are concerned about that slowing economy, which is supposed to be biggest provider of growth moving forward.

The harm that China will likely incur on Apple is this pullback, however, as Apple’s business in China is much more resilient than most people believe. The emotional reaction to the slowing market is Apple is in trouble and will sell less iPhones, but these concerns over China have been brought up over the last six years, dating back to 2010. During that same time, the company’s business in China has continued to skyrocket.

Cook has come out and said that Apple continues to experience massive growth in China through July and August. He even claimed that iPhone sales have accelerated over the last few weeks. With the middle class there expected to continue to grow, Cook is confident the iPhone will continue to be a success in that market, and the stock should bounce back as these concerns are calmed.

How To Trade Apple Stock

Having looked at the factors that will affect Apple during the rest of the year, understanding how best to trade this stock could be key. Thinking about the stock simply, one would expect just before product releases to be the best time to buy Apple stock, as the event will bring up new opportunities and increase excitement. This has proven to not be true in the past, however.

Instead, the stock tends to have an initial jump that is not sustained. While excitement for the new product is initially high, analysts tend to underestimate their appeal and the demand for the product. This was especially true for the iPhone 6, which blew away analysts’ predictions. Further, the products tend to get picked apart for their issues and reports of weak demand tend to harm the stock price.

The better time to buy Apple stock comes before earnings reports, when the company tends to blow expectations away. This was most recently seen during the fourth quarter earnings report last year, when the company sold over 71 million iPhones.

While the company is unlikely to meet that number this year, it is a safe bet it will beat expectations once again, as demand for the iPhone will always be high during the holiday season. Likewise, look for the Apple TV to beat expectations as well, as it will be a popular gift for children due to the casual gaming abilities. These gains are much stronger and resilient, offering strong returns to investors who appropriately time the buying of this stock.

Algorithmic Analysis

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

I Know First has had success predicting the movement of Apple’ stock price in the past. In this one-year forecast from August 10th, 2014, Apple had a bullish signal strength of 13.33. In accordance with the algorithm’s prediction, the stock price increased 28.53% during that time.

Having explained how I Know First’s algorithm works, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company. The three-month and one-year forecasts for Apple are included.

Forecast

Apple has a positive signal strength for both time horizons. This indicates that the stock is slightly undervalued currently. Over the predicted time horizons, the introduction of the Apple TV streaming service could add another source of revenue for the company, meaning it could be more undervalued than the algorithm currently recognizes. The fact that the algorithm is bullish on Apple without this business is a positive sign, as well.

Positive signal strength does not mean investors should automatically buy the stock. Dr. Roitman, who created the algorithm, created rules for entry for a stock such as Apple. Using this trading strategy, an investor should buy a stock if the last 5 signal strength’s average is positive and if the last closing price is above the 5-day moving average price. When both of these conditions are met, it is a good time to initiate a position in the stock.

Conclusion

Apple’s stock price has been hit hard by the concerns in the Chinese market, with the stock price falling almost 14.5% over recent weeks. I Know First believes that these concerns are overblown and that Apple is still an attractive stock to own moving forward. The big event in September will draw plenty of attention, but that does not mean it is the right time to buy the stock. Instead, investors should wait until before the next earnings report, when real stock gains can be realized. With a revamped iPhone and Apple TV, the company will continue to prosper over the long-term, as Cook has proven himself during his time as Apple CEO.

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I Know First is a financial services firm that utilizes an advanced self-learning algorithm to analyze, model and predict the stock market. Co-Founder Dr. Lipa Roitman, a scientist, with over 20 years of experience created the market prediction system. The algorithm is based on artificial intelligence, machine learning and incorporates elements of artificial neural networks as well as genetic algorithms to model and predict the flow of money between 2,000 markets from 3-days to a year: stocks, ETF's, world indices, gold, currencies, interest rates, and commodities. The algorithm outputs a predicted trend as a number, which in turn, is used by traders to identify when to enter and exit the market. While forecasts can be used for intra-day trading, the predictability tends to become stronger over longer time-horizons such as the 1-month, 3-month and 1-year forecasts. Visit us at iknowfirst.com

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