Goldman Sachs believes Apple will perform better than expected in its next earnings report. They anticipate strong revenue growth and improving profit margins. This positive outlook is driven by significant growth in services and solid sales across products like iPhones, Macs, iPads, and wearables. Additionally, gross margins are expected to exceed predictions, aided by lower tariff costs and currency factors.

Outlook And Considerations

Despite this optimistic view, Goldman Sachs advises caution due to uncertainties around trade policies and tariffs. There are also potential short-term risks linked to a drop in advertising revenue. Apple will announce its results after the market closes next Thursday. Based on the bank’s insights, we are preparing for a possible rise in Apple’s stock price. We plan to explore call options that expire a few weeks after the announcement to capture immediate movement and any potential growth afterward. This positive outlook is supported by recent independent data. For instance, official figures from China reveal that iPhone shipments jumped over 50% in May compared to last year, reversing a previous downward trend. This strong recovery in an important market adds credibility to the expectation of strong revenue growth.

Options Strategy And Consideration

However, we must be mindful of the high implied volatility that often comes before earnings announcements. The options market currently anticipates a stock move of about 4% to 5% after the report, making options purchases more expensive as they reflect this anticipated price change. Historically, even when Apple beats expectations, its stock has sometimes declined due to cautious future guidance. The significant rally after the last report in May was largely due to a record $110 billion share buyback, not solely because of the core results. This highlights that just the headline numbers aren’t everything for the market. Consequently, instead of simply purchasing expensive call options, a smarter strategy could be a bull call spread. By selling a higher-strike call alongside the one we buy, we can reduce our upfront costs and lessen our exposure to volatility changes after the report. This strategy defines our risk while allowing us to profit if the stock rises as Goldman Sachs predicts. Create your live VT Markets account and start trading now.

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