Harding and Company – What to Watch in the Markets This Tuesday – Apple Earnings

MANHATTAN, N.Y. - Jan. 29, 2019 - PRLog -- The iPhone maker has been thrust into the spotlight this year after it slashed its revenue guidance for Q4, citing weak iPhone sales in China. Apple warned in early January that they expect around $84 billion in sales during the quarter. It was the first time that the tech giant cut its revenue guidance in two decades.

Apple's warning sent Wall Street and investors into a frenzy. Most firms on Wall Street downgraded their rating on the stock and slashed their price targets following the weaker outlook. As Apple gears up to report on Tuesday, the outlook remains bleak among market watchers.

Harding advised in a note to clients Monday that weak iPhones sales has now been widely known and accepted, but now investors will be looking to growth in the services business. "Apple plans to disclose its gross margin for the Services business for the first time starting this [quarter]." The firm went on to explain that consensus remains that Apple's services business will be highly profitable.

Harding believes that it's time to buy the dip in Apple stock heading into earnings. "We believe the recent pullback is an attractive entry point given upcoming Services launches and shares already pricing in extremely cautious iPhone replacement cycle," the company wrote in a note last week.

Analysts polled by Bloomberg are expecting Apple to report earnings of $4.17 per share on $83.97 billion of revenue for Q4.

Earnings continue to roll out with 3M, Allergan, Biogen, Harley-Davidson, Lockheed Martin, Pfizer, PulteGroup and Verizo reporting before market open. Advanced Micro Devices, Amgen and eBay will round things out after the market close.

Additionally, the Federal Open Market Committee (FOMC) meeting kicks off Tuesday. Following two days of meeting, the Federal Reserve Chairman will hold a press conference to announce whether or not the central bank will be raising short-term interest rates from 2.25% to 2.50%.

"Look for the word 'patience' to usurp 'gradual' in the statement, Powell to carry the message forward in the Q&A, and further communication on the balance sheet. Our rates strategists do not expect much market reaction unless guidance on balance sheet policy changes," Harding and Company analysts said last week.

Consensus among economists is that the Fed will pause from hiking rates at this month's meeting.

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