How Investors Can Capitalize On Apple's Earnings Report

All eyes will be on Cupertino after the closing bell on Tuesday. Apple Inc. AAPL has beat earnings expectations for the past 8 quarters and, according to Fortune, is likely to do so again.

But how should investors play the report? Benzinga consulted two professional traders to get their outlooks.

Don't Sell The News

Adam Sarhan, CEO of Sarhan Capital, told Benzinga that the options market is pricing in a $6.35 swing in Apple's stock after the close, meaning that share prices are likely to shift up to 4.8 percent from their current value of $131. Nevertheless, he maintained that a "big beat" could give Apple an even larger boost.

But even if the stock were to add significant value this afternoon, Sarhan discouraged investors from selling too early. "Apple is [still] and undervalued growth stock...they put up strong earnings every quarter," but have a PE ratio of just 16x, he noted, which is a few points below that of the S&P 500. "Longer term," Sarhan said, "it's probably going to go higher."

Related Link: App Store, Apple Music And Other Apple Services Experience Problems Ahead Of Earnings

Sean Udall, CIO of Quantum Trading Strategies, concurred. He believes that the tech company still has plenty of room to grow over the next 12 months or more, giving it a long-term price target of $165–185. "If they produce a good quarter [today] as I think they will and not terrible guidance," he told Benzinga, "I might even nudge that [trajectory] up a bit."

Although Udall admitted that he wouldn't buy Apple at its current price, he maintained that that was only because there were other tickers that could climb faster. He advised those who already have a stake in Apple to hold out at least until shares hit the $155–160 range. And even if the company were to post a rare earnings miss, he doesn't believe that that would cause him to lower his long-term projections.

Udall expects Apple to announce sales of 50.7 million iPhones, 11.6 million iPads, 4.9 million Macs and 3.5 million smartwatches.

Other Tickers

In addition to Apple, Sarhan and Udall noted other tickers that could be affected by the firm's earnings report.

According to Sarhan, Cirrus Logic, Inc. CRUS, NXP Semiconductors NV NXPI and Avago Technologies Ltd AVGO – all of which supply chips for Apple products – could all potentially gain on an Apple beat.

He also mentioned Nuance Communications Inc. NUAN, which is the voice behind theSiri voice command system, as a stock to watch.

Udall added Skyworks Solutions Inc SWKS and Qorvo Inc QRVO, two other chip providers, but took a bearish stance on both. According to him, most of Apple's suppliers are overvalued. The only exceptions, in his opinion, are Cirrus and InvenSense Inc INVN.

Investors will surely have some decisions to make Tuesday evening, as Tim Cook and co. release one of the most highly anticipated reports of earnings season. Hopefully, they will see yet another opportunity to harness value from America's most famous tech firm.

Image Credit: Public Domain